Strong AI adoption and cloud helps Microsoft deliver another strong quarterly performance, amid $3 trillion valuation
Microsoft continues to reap the rewards from its heavy backing of artificial intelligence (AI) and cloud computing.
The software giant posted a 33 percent increase in quarterly profits, helped by heavy investments in those two segments. But the firm is also heavily investing in gaming, as evidenced by the October closing of its $69 billion acquisition of Activision Blizzard.
Earlier this week analysts had said that they expected Microsoft to post strong year-on-year quarterly revenue gains of 15 percent, thanks to the strong performance of its own products with integrated generative AI fuel demand for its Azure cloud services.
A consensus of analysts had also projected revenues at Microsoft of $61 billion (£48bn) for the quarter, up from $53bn for the same period a year ago.
Microsoft last week had again surpassed Apple by market value, edging to just over a $3tn market capitalisation as Apple, the most valuable company since 2011, dipped below that mark.
Microsoft is still valued at $3 trillion, as of Wednesday afternoon.
But how did Microsoft meet the financial expectations of analysts?
Well for the second quarter ending 31 December 2023, Microsoft posted a net profit of $21.87bn, up 33 percent from $16.4bn in the same year-ago quarter.
The Redmond, Washington-based software maker also posted quarterly revenues up 18 percent at $62bn, from $52.7bn a year earlier.
“We’ve moved from talking about AI to applying AI at scale,” said Satya Nadella, chairman and CEO of Microsoft. “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.”
Digging into the results, Microsoft seems to have performed well in all its operating segments.
Revenue in the ‘Productivity and Business Processes division’, the segment with the LinkedIn social network and its Office productivity software, rose 13 percent to $19.2 billion, as Office Commercial products and cloud services revenue increased 15 percent.
Office Consumer products and cloud services revenue increased 5 percent, and LinkedIn revenue increased 9 percent.
Microsoft Azure continues to be a strong performer for the tech giant, as revenue in the ‘Intelligent Cloud division increased 20 percent to $25.9 billion, driven by Azure and other cloud services revenue growth of 30 percent.
And it seems that Microsoft continues to shrug off any PC slump, after revenue in the ‘More Personal Computing division’ rose 19 percent to $16.9 billion.
Windows revenue increased 9 percent with Windows OEM revenue growth of 11 percent and Windows Commercial products and cloud services revenue growth of 9 percent. #
Devices revenue decreased 9 percent, but Xbox content and services revenue increased 61 percent “driven by 55 points of net impact from the Activision acquisition.”