Microsoft exceeded Wall Street’s expectations with revenue of $56.5 billion, up 13% year-over-year, and earnings of $2.99 per share, up 27%, with increased cloud revenue foreshadowing strong interest in its artificial intelligence products.
The company’s shares are up nearly 4% in after-hours trading after reporting the results for the three months ended Sept. 30, the first quarter of its 2024 fiscal year.
Quarterly profits were $22.3 billion, a 27% increase.
Divisional results: Revenue growth was in the double-digits in two of Microsoft’s three divisions.
- Productivity and Business Processes, revenue of $18.6 billion, up 13%, led by Office 365 commercial and Microsoft Dynamics.
- Intelligent Cloud, revenue of $24.3 billion, up 19%, led by Azure and other cloud services.
- More Personal Computing, revenue of $13.7 billion, up 3%. Windows revenue rose 5% to $5.6 billion.
Cloud growth: Microsoft Cloud revenue rose 24% to $31.8 billion. This metric cuts across multiple divisions to include revenue from the Azure cloud platform, Office 365 Commercial, the commercial portion of LinkedIn, and Dynamics 365.
Azure and cloud services revenue rose 29% for the quarter, exceeding the company’s previously stated projections by a few percentage points.
AI impact: For now, Azure AI services are the primary area where the company is seeing revenue from AI. CFO Amy Hood said on Microsoft’s prior quarterly call that about 2 points of Azure growth would come from AI in this quarter.
Update: On today’s call, Hood said 3 points of Azure growth came from AI, exceeding that benchmark.
“We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers,” Microsoft CEO Satya Nadella said in the company’s earnings release.
The launch of Microsoft 365 Copilot, the company’s closely watched new AI service for large businesses, is Nov. 1.
Devices decline: Revenue from Microsoft’s Devices business fell more than 22% to $1.1 billion in the latest setback for the business unit that includes Microsoft Surface, Hololens and PC accessories.
Advertising revenue up modestly: Revenue from search and news advertising rose 5% to $3.1 billion. This is an area where Microsoft has focused heavily on AI with minimal payoff so far in its competition against Google.
Expectations: Wall Street analysts surveyed in advanced expected Microsoft to report earnings of $2.65 per share, a 13% increase from a year earlier, on revenue of $54.5 billion, up 10% year-over-year, as reported by Yahoo Finance.
