Microsoft reports high profits and predicts AI will boost sales

After the software company released fiscal third-quarter results and quarterly outlook that surpassed analysts’ expectations, Microsoft shares increased 9% in extended trading on Tuesday.

Here is how the business fared:

• Refinitiv reports that earnings came in at $2.45 per share compared to analysts’ expectations of $2.23.
• Refinitiv reports that revenue was $52.86 billion instead of the analysts’ prediction of $51.02 billion.

Amy Hood, the vice president of finance at Microsoft, predicted $54.85 to $55.85 billion in sales for the fourth quarter of the current fiscal year. The median estimate, at $55.35 billion, is a 6.7% increase over the $54.84 billion consensus estimate of the analysts surveyed by Refinitiv.

Innovation is the first step in any major platform transformation. Hood said Microsoft would scale up to meet the rising demand fueled by customer change, and the firm will keep investing in cloud infrastructure, focusing on spending linked to AI. Furthermore, we anticipate that, over time, the revenue will increase. She added that the company is excited about the announced AI capabilities’ early feedback and demand signals.

From $16.73 billion, or $2.22 per share, a year earlier, net income increased 9% to $18.3 billion, or $2.45 per share. According to a statement, revenue rose 7% to $52.86 billion from $49.36 billion last year.

The Azure public cloud, Enterprise Services, SQL Server, and Windows Server all fall within Microsoft’s Intelligent Cloud business area, which produced $22.08 billion in revenue. This is a 16% increase over the StreetAccount-surveyed analysts’ consensus estimate of $21.94 billion.

Azure and other cloud service revenue increased by 27%, a downward slide from 31% in the previous quarter. The average growth forecast laid by analysts was 26.5%, while StreetAccount’s analysts were expecting 27.2%.

Dynamics, LinkedIn, and Office, are all parts of the Productivity and Business Process division, which reported $17.52 billion in sales, an increase of roughly 11% and more than the StreetAccount average of $17.05 billion. According to Microsoft, increased income per user enabled the corporation to generate 14% more money from commercial Office 365 productivity software subscriptions.

CEO Satya Nadella reported that the Teams collaboration software had over 300 million active monthly users during the quarter. That is an increase from 280 million in the prior quarter.

Bing, Windows, Surface, and Xbox were part of the More Personal Computing segment, which generated $13.26 billion in revenue, a 9% decline but more than the $12.25 billion StreetAccount estimate. According to Nadella, Bing has over 100 million daily active users, and gaming subscription revenue has reached $1 billion.

Because of increasing channel inventory levels, sales of Windows operating-system licenses to device makers fell by about 28%. According to the research firm Gartner, PC shipments decreased by 30%. Nevertheless, according to Hood, the demand for PCs was slightly higher than the management had anticipated.

Microsoft claimed it would use OpenAI’s artificial intelligence models for a new iteration of its Bing search engine and to improve the Microsoft 365 productivity software when it announced a new multibillion-dollar investment in the firm during the quarter.

“We feel we have a good lead and differentiated offering up and down the stack” – Nadella.

Excluding the after-hours transaction, Microsoft shares have increased by 15% this year, compared to a 6% increase in the S&P 500 index during the same time.