Microsoft Corp. MSFT-Q beat Wall Street estimates for third-quarter revenue and profit on Thursday, driven by gains from AI adoption across its cloud services, and the company’s shares jumped over 4 per cent in extended trade.
Revenue rose 17 per cent to US$61.9-billion in the quarter ended March, exceeding the consensus estimate of US$60.80-billion, according to LSEG data. Earnings per share of US$2.94 topped Wall Street’s target of US$2.82.
The rise in Microsoft shares after the bell lifted the company’s stock market value by US$128-billion.
The stock has soared on Microsoft shipping generative AI (genAI) tools based on its strategic partnership with ChatGPT creator OpenAI and also helped it capture the world’s most valuable company crown from Apple this year.
Microsoft’s strong profit and revenue offset concerns about higher-than-expected AI-fuelled capital expenditures. On Wednesday, Meta’s lower-than-anticipated revenue forecast and guidance for higher expenses driven by surging AI costs knocked US$200-billion off the Facebook and Instagram parent’s market value.
“We’re continuing to see customer demand grow quite a bit,” Brett Iversen, Microsoft’s vice-president of investor relations told Reuters. “And so we’re making sure to scale our available capacity in line with that.”
Revenue from Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, rose to US$26.7-billion, passing the average estimate of US$26.24-billion, LSEG data showed.
Azure revenue rose 31 per cent, higher than a 29-per-cent growth estimate from market research firm Visible Alpha.
Microsoft does not break out the absolute revenue figure for Azure, the part of its business best situated to capitalize on booming interest in artificial intelligence.
The Copilot tool, a set of genAI assistants launched in November for US$30 a month, has lifted Microsoft’s enterprise software and Windows businesses. A recovery in personal computer sales was also a factor.
The More Personal Computing unit revenue increased 17 per cent to US$15.6 billion, surpassing analyst expectations of US$15.08-billion, according to data from LSEG.
Productivity and Business Processes, Microsoft’s unit that houses office software and LinkedIn Corp., increased revenue 12 per cent to US$19.6-billion. Analysts had estimated US$19.54-billion, according to data from LSEG.
Microsoft has been spending heavily to support its AI services, and capital expenditures grew from US$11.5-billion in the previous quarter to US$14-billion, passing estimates of US$13.14-billion, according to Visible Alpha.