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Microsoft beats quarterly revenue estimates

Investors are watching closely to see what kind of sales flow come from the tens of billions of dollars the company is pouring into AI

Shares of Microsoft have surged this year, helping it briefly top its rival Apple as the world's most valuable listed company earlier this month. Photograph: FABRICE COFFRINI/AFP via Getty Images

Tue Jan 30 2024 - 21:24

Microsoft beat Wall Street estimates for second-quarter revenue on Tuesday, as new AI features helped attract customers to its cloud and Windows services.

Microsoft shares fell 1 per cent in after-hours trading. They climbed 57 per cent last year. Along with a rally in other tech stocks, including Alphabet and Nvidia, Microsoft helped fuel a 24 per cent surge in the S&P 500 in 2023.

Revenue grew 18 per cent to $62 billion (€57 billion) in the quarter ended December 31, compared with the average analyst estimate of $61.12 billion, according to LSEG data.

Revenue at Microsoft's Intelligent Cloud unit, which houses the Azure cloud computing platform, grew 20 per cent to $25.9 billion. Sales of Azure, for which Microsoft does not disclose a dollar figure, grew 30 per cent, compared with a 27.7 per cent consensus estimate from Visible Alpha.

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Investors are watching Microsoft’s Azure and Office revenues closely to see what kind of sales flow come from the tens of billions of dollars the company plans to pour into data centres this year to deliver generative AI.

Shares of Microsoft have surged this year, helping it briefly top its rival Apple as the world's most valuable listed company earlier this month. Investors have rewarded the company's push into AI and strategic partnership with Silicon Valley start-up and ChatGPT creator OpenAI.

Microsoft's share surge was not dented by a power struggle within OpenAI that highlighted the software giant's lack of direct control over its important partner. Microsoft also faces some legal and regulatory challenges.

In November, Microsoft started selling Copilot, an AI assistant that can summarise an email inbox or craft a slide show, for $30 per month, which analysts say is a premium price.

Early sales of the product showed up in the firm’s commercial sales of Office software, where revenue grew 17 per cent, compared with analyst expectations of commercial Office sales growth of 14.2 per cent, according to data from Visible Alpha. Microsoft does not provide an absolute dollar figure for the sales. – Reuters

(c) Copyright Thomson Reuters 2024

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