Microsoft Exceeds Revenue Estimates Thanks to AI Technology

Microsoft reported better-than-expected revenue and profit for the fourth quarter, driven by strong performance in its cloud business due to new artificial intelligence (AI) technology. Despite increased costs from building new data centers to support AI, the company managed to surpass Wall Street estimates.

Microsoft has been investing in AI, with a particular focus on generative AI services. Its early investment in OpenAI, the owner of popular service ChatGPT, has positioned Microsoft well to capitalize on the benefits of AI. The company is integrating AI into its own products, offering services like “Copilot” for Microsoft 365, which summarizes a day’s worth of emails into a quick update. Additionally, Microsoft aims to sell cloud computing services that allow other companies to build their own AI services.

In the fiscal fourth quarter that ended in June, Microsoft’s revenue reached $56.2 billion, surpassing analysts’ consensus estimate of $55.5 billion. Net income per share was $2.69, beating estimates of $2.55 per share. The Intelligent Cloud unit, which includes the Azure cloud computing platform, generated $24 billion in revenue, surpassing expectations of $23.8 billion. Azure’s revenue grew by 26%, outperforming estimates.

While Microsoft’s PC business experienced a slump, with Windows operating system sales falling to $13.9 billion, other segments showed growth. The segment that includes LinkedIn and Office productivity software reached $18.3 billion in revenue.

Microsoft has been making significant capital expenditures to support its AI initiatives, with spending on data centers for AI work increasing from $7.8 billion in the fiscal third quarter to $10.7 billion in the fourth quarter. The company remains committed to leading the AI platform shift.

Overall, Microsoft’s strong financial results highlight the success of its AI-focused strategy. The integration of AI across its products, including Azure, Microsoft 365, GitHub, and developer tools, positions the company to continue capitalizing on the growing interest in AI.