Microsoft has reported a significant increase in profits, beating Wall Street’s expectations, as its heavy investments in artificial intelligence (AI) continue to bear fruit.
The technology giant’s revenue surged by 17% to $61.86 billion during the first three months of 2024, exceeding analyst expectations of $60.88 billion. Earnings per share increased by 20% to $2.94, ahead of the expected $2.83.
Azure Cloud and AI Services Lead the Charge
Microsoft’s AI tools are “orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” said Satya Nadella, the chief executive of Microsoft. As the group races to integrate AI across its software and services, Nadella said its Azure cloud computing business saw the pace of deals worth $100 million and $10 million increase by double-digit percentages.
The company’s Intelligent Cloud segment, including the Azure public cloud, Windows Server, Nuance, and GitHub, generated $26.71 billion in revenue, up about 21% and more than the $26.26 billion consensus among analysts surveyed by StreetAccount. Revenue from Azure and other cloud services grew 31%, compared with 30% in the previous quarter. Inside of the Azure growth, 7 percentage points were related to AI, up from 6 points of impact in the previous quarter.
GitHub Copilot Sees Rapid Subscriber Adoption
Microsoft’s GitHub Copilot code-generation tool now has 1.8 million paid subscribers, and the company’s More Personal Computing revenue totaled $15.58 billion, up approximately 18% and above the StreetAccount consensus of $15.08 billion. Revenue from Xbox content and services was up 62%, thanks to the acquisition of Activision Blizzard. Sales of Windows licenses to device makers popped 11%.
Microsoft has committed $13 billion to its partnership with OpenAI, the maker of the ChatGPT chatbot, and it has been building new data centers around the globe to meet what it anticipates will be more AI demand. The company spent $14 billion on capital expenses and leases in the first three months of the year, up from $11.5 billion in the previous quarter.
Microsoft Stock Rises on Strong AI-Powered Results
Shares in Microsoft rose 4% during after-hours trading in New York on Thursday, and the company’s market value is now nearly $3 trillion. Microsoft’s shares have increased by more than 30% over the past year, although less than the rallies of Amazon and Google, whose stocks have risen by more than 60% and 40%, respectively.
Microsoft’s strong performance in the quarter was driven by its growth in AI, cloud computing, and gaming. The company’s focus on AI and its significant investments in the space have positioned it well for continued growth in the future.