Microsoft’s earnings beat Wall Street expectations as its big bet on artificial intelligence continued to pay off in the latest quarter.
The tech giant has invested billions of dollars in AI in a bid to boost its growth, particularly that of its cloud computing services. Its cloud computing revenue increased more than 20%.
Microsoft’s AI tools “are orchestrating a new era of AI transformation, driving better business outcomes across roles and industries,” said Satya Nadella, CEO of Microsoft.
As the group races to integrate AI into its software and services, Nadella said its Azure cloud computing business saw the pace of deals worth $100 million and $10 million increase by double-digit percentages. It also started selling its Copilot AI software plugin to small businesses.
Microsoft’s total revenue rose 17% to $61.86 billion during the first three months of 2024, the third quarter of its financial year, beating analyst expectations of about $60.88 billion. Earnings per share rose 20% to $2.94, ahead of the expected $2.83.
The group’s shares rose 4% in after-hours trading in New York on Thursday.
With a stock market value of almost $3 trillion, Microsoft is the largest public company in the world. The company’s shares have risen more than 30% over the past year, an impressive increase, although smaller than the rallies of Amazon and Google, whose shares have risen more than 60% and 40%, respectively.
With a multi-million-dollar investment in OpenAI, developer of ChatGPT, Microsoft has sought to position itself at the heart of the rise of AI and the destination of the industry’s best talent. In March, the company announced that it had hired a co-founder of Google’s Deepmind AI subsidiary, Mustafa Suleyman, as well as a co-founder of the $4 billion startup Inflection AI and several of its employees.
In November, after OpenAI’s board ousted its co-founder and CEO Sam Altman, he briefly said he would move to Seattle and join Microsoft in a major coup for Nadella. Most OpenAI employees said they would join Altman, effectively destroying the company. Altman was reinstated as CEO days later.
Microsoft is now trying to monetize its dominance in this space. The company reported in the final months of 2023 that AI contributed 6% of revenue growth within its powerful Azure cloud computing division; compared to 3% in the previous quarter, according to Yahoo Finance.
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The company said Thursday that AI-powered additions to LinkedIn had increased engagement on the professional social network. Nadella highlighted LinkedIn’s AI tools for writing posts and articles, which she said helped the number of LinkedIn sessions grow by 11%. LinkedIn revenue increased 10%, according to Microsoft’s press release.
It has been signing a number of high-profile AI deals. Two days before this week’s earnings report, Microsoft announced that Coca-Cola had signed a five-year, $1.1 billion deal with Azure for cloud computing and artificial intelligence services. Last month, it announced a partnership with artificial intelligence startup Mistral to offer access to the French company’s Azure models.
