Microsoft Says It Will Continue To Invest In AI, Cloud As Q3 Earnings Beat Expectations

Microsoft's net income grew by 9 per cent to $18.3 billion, or $2.45 per share, from $16.73 billion, or $2.22 per share, a year ago.

Microsoft shares have risen by 15 per cent so far this year.

In extended trading on Tuesday, Microsoft's shares rose by 9 per cent after the company issued better-than-expected results for its fiscal third quarter and quarterly guidance. According to Refinitiv, Microsoft's earnings per share (EPS) were $2.45, beating the analysts' expectations of $2.23. Additionally, the company generated revenue of $52.86 billion, compared to analysts' expectations of $51.02 billion.

During a conference call with analysts, Microsoft's finance chief, Amy Hood, forecasted revenue of $54.85 billion to $55.85 billion for the fiscal fourth quarter. The middle of the range, at $55.35 billion, implies 6.7 per cent growth, topping the $54.84 billion consensus among analysts surveyed by Refinitiv. Hood expressed her bullishness regarding artificial intelligence, stating that the company will continue to invest in its cloud infrastructure, especially in AI-related spend, as it scales to meet the growing demand driven by customer transformation.

Microsoft's net income grew by 9 per cent to $18.3 billion, or $2.45 per share, from $16.73 billion, or $2.22 per share, a year ago. The company's revenue increased by 7 per cent to $52.86 billion from $49.36 billion a year ago. The Intelligent Cloud business segment, which includes the Azure public cloud, Enterprise Services, SQL Server, and Windows Server, generated $22.08 billion in revenue, up 16 per cent and higher than the $21.94 billion consensus among analysts surveyed by StreetAccount. Revenue from Azure and other cloud services increased by 27% compared to 31 per cent in the previous quarter, and the Productivity and Business Process segment, containing Dynamics, LinkedIn, and Office, posted $17.52 billion in revenue, up about 11 per cent and above the StreetAccount consensus of $17.05 billion.

The Teams communication app had over 300 million monthly active users in the quarter, an increase from 280 million in the previous quarter. Furthermore, the More Personal Computing segment, featuring Bing, Windows, Surface, and Xbox, delivered $13.26 billion in revenue, down 9 per cent but more than the $12.25 billion StreetAccount consensus. Bing now has over 100 million daily active users, and revenue from gaming subscriptions approached $1 billion, CEO Satya Nadella said.

During the quarter, Microsoft announced a new multibillion-dollar investment in OpenAI and said it would draw on the company's artificial intelligence models for a new version of its Bing search engine and enhancements to the Microsoft 365 productivity software. Excluding the after-hours move, Microsoft shares have risen by 15 per cent so far this year, while the S&P 500 index is up 6 per cent over the same period.