Microsoft exceeds financial expectations despite worries about the economy
Microsoft’s cloud computing business had a surprisingly strong quarter despite pressure from a slowing U.S. economy, the company said Tuesday.
Revenue for the first three months of the year rose 7% from a year earlier to $52.9 billion, and profit rose 9% to $18.3 billion. Both exceeded Wall Street expectations.
Microsoft’s cloud business, which includes Azure, its cloud computing product and Microsoft 365 platform, had revenue of $28.5 billion, up 22% year-on-year former.
Azure sales, a key result observed by investors, increased by 27%, which was in line with investors’ expectations. Still, that was down from a 46% increase the previous year. Overall, the segment the company calls Intelligent Cloud grew 16% year over year, which was better than expected.
Microsoft’s cloud products are “certainly a very important driver for us going forward,” said James Ambrose, director of investor relations at Microsoft.
Microsoft shares jumped more than 8% in after-hours trading.
Microsoft, like many other tech companies, has been held back by a sluggish economy after substantial growth during the pandemic. The company announced in January that it would lay off 10,000 employees.
The company’s Windows business slumped as the global market for personal computer sales slowed. Microsoft’s personal computing segment revenue in its most recent quarter was $13.3 billion, down 9% from a year earlier. In this category, Windows OEM revenue (original installations of Windows software on new computers) fell 28%, and device revenue fell 30%.
Revenue from Microsoft’s video games segment, its largest consumer business, fell 4% from a year earlier as Xbox hardware sales fell 30%.
Still, Microsoft shares have remained strong, buoyed in part by the company’s foray into the burgeoning field of artificial intelligence.
Mr Ambrose warned that the high numbers did not necessarily portend an improving macroeconomic environment. “I don’t know if this signals a major shift in our view” of the economy, he said.
Amy Hood, Microsoft’s chief financial officer, said on a call with investors that sales growth in the current quarter could be flat compared to the exceptionally strong quarter last year.
Microsoft is also poised to cash in on the AI boom with its investment in OpenAI, the startup behind the chatbot ChatGPT. It has already integrated ChatGPT into its Bing search engine, and the company has announced that it will integrate AI into other Microsoft products as well.
Although the company said it was too early for futuristic technology to affect its quarterly financial figures, Satya Nadella, its chief executive, said “AI” or “OpenAI” at least 24 times in his 15-minute introduction during of the call with investors.
“We have the most powerful AI infrastructure,” Nadella said at one point, mentioning various companies already using Microsoft’s AI tools in their businesses. To meet the high demand for its AI products, the company said it would spend to develop this infrastructure.
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