Microsoft Corp. has surpassed Wall Street's expectations for its fiscal second-quarter revenue, with artificial intelligence (AI) innovations playing a pivotal role in attracting customers to its cloud and software services.
The tech giant's shares experienced a 2% dip after-hours, despite the strong earnings report. Microsoft's strategic partnership with OpenAI, the creator of ChatGPT, has been instrumental in integrating advanced chatbots into core products like Office and Bing over the past year. This move has resonated with business customers eager to leverage the latest breakthroughs in AI technology.
Investor enthusiasm around AI has significantly boosted Microsoft's stock, contributing to a remarkable 57% rise in 2023.
Cloud Computing Powerhouse
Microsoft's cloud-computing division, which ranks as the second-largest behind Amazon.com, saw an impressive growth of nearly 30% in the latest quarter. CEO Satya Nadella emphasized the company's shift from merely discussing AI to implementing it at scale, stating, \"By infusing AI across every layer of our tech stack, we're winning new customers and helping drive new benefits and productivity gains across every sector.\"
Brett Iversen, Microsoft's vice president for investor relations, highlighted that AI accounted for 6 percentage points of Azure's growth rate in the second quarter, doubling the impact from the first quarter.
Total revenue reached $62 billion, marking an 18% increase and exceeding the analyst average of $61.12 billion. Adjusted profit stood at $2.93 per share, also surpassing expectations.
Within the Intelligent Cloud unit, revenue grew by 20% to $25.9 billion. Azure's sales increased by 30%, the highest growth rate in four quarters, outperforming Google Cloud's 25.7% growth.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, commented, \"The software giant has delivered a healthy set of results, but not in a strong enough dose to appease the market.\"
Strong Performance Across Segments
The More Personal Computing segment, encompassing Windows OS and gaming, saw sales rise by 19% to $16.9 billion. This growth was partly driven by the $69 billion acquisition of Activision Blizzard.
In the Productivity and Business Process segment, which includes LinkedIn and Office sales, revenues increased by 13% to $19.2 billion, narrowly beating estimates.
AI-Powered Surge
Investors have rewarded Microsoft's aggressive push into AI and its collaboration with OpenAI. In November, Microsoft launched Copilot, an AI assistant priced at $30 per month, capable of tasks like summarizing email inboxes and creating slide shows. Early adoption has positively impacted Office software sales, which grew by 17%, exceeding the expected 14.2% growth.
Iversen noted that Office's commercial offerings now boast 400 million paid seats, up from 382 million in April 2023.
Capital expenditures increased by $300 million from the previous quarter to $11.5 billion, positioning Microsoft to invest over $46 billion this fiscal year in data centers to support generative AI.
Microsoft's stock performance has also seen a significant boost, recently overtaking Apple as the world's most valuable listed company. However, the company faces challenges, including a power struggle within OpenAI and ongoing legal and regulatory issues.
Reference(s):
cgtn.com
