Microsoft's AI Features Boost Sales and Shares
Microsoft Corp has gone beyond Wall Street’s expectations in both revenue and profit for the quarter, thanks to its cloud computing and Office productivity software businesses. In a report released on Tuesday, the Redmond-based company announced that artificial intelligence (AI) products were also a significant help in increasing its sales.
For the fiscal third quarter, the company’s profits amounted to $2.45 a share, surpassing the estimated $2.23 per share by Wall Street and up by 10% from last year's same period. The company's revenue for the quarter ended March rose to $52.9bn from the previous year, according to Refinitiv. This surge was primarily due to the company’s success in selling software and cloud computing services to its clients.
One of the highlights of Microsoft this year was its partnership with OpenAI, the creator of ChatGPT and Bing's AI technology update. The company’s cloud business, Azure, grew 27% beating analyst expectations, and now has over 2,500 Azure-OpenAI service customers. Together with the AI-powered features in several products, Bing, which has seen a significant increase in usage since the update, now has 100 million daily users, according to Chief executive Satya Nadella.
In regular trading, prior to its report, Microsoft’s shares fell by 2.2%, making them the biggest drag on the S&P 500 on that day. However, following the announcement of Microsoft’s strong report, shares gained 8.3% in after-market trading. This gain in Microsoft's shares lifts other significant cloud operators, such as Amazon.com Inc.
Microsoft forecast that revenue in its primary segments for the current quarter would match or even exceed Wall Street's targets. It predicted revenue in the intelligent cloud unit for the current quarter, the fiscal fourth, of $23.6-$23.9bn and in the More Personal Computing segment of $13.35-$13.75bn. Meanwhile, the productivity and business processes unit, which includes Office, is expected to produce revenue of $17.9-$18.2bn, which beats the analysts’ average target of $17.8bn. Analysts had expected a gloomy economic outlook to hit Microsoft’s Windows business, but the sales drop in the segment was less severe than expected, with Microsoft reporting revenue of $13.3bn versus the predicted $12.19bn, according to Refinitiv data.
Alphabet Inc, which also has a large cloud business, reported strong results on Tuesday, lifting its shares 2.4% after the bell. Those results and Microsoft’s helped boost shares of Amazon.com Inc, another major cloud operator, by 4.8% in after-hours trading.
