Microsoft exceeded Wall Street’s expectations in its fiscal third quarter, with earnings per share of $2.94 compared to the expected $2.82 and revenue of $61.86 billion versus $60.80 billion. The company saw a 17% year-over-year growth in total revenue and an increase in net income to $21.94 billion. Microsoft’s finance chief, Amy Hood, predicted $64 billion in revenue for the fiscal fourth quarter, with an operating margin of 42.3%.
In the Intelligent Cloud segment, which includes Azure, Windows Server, Nuance, and GitHub, Microsoft reported $26.71 billion in revenue, up 21% and beating analyst consensus. Revenue from Azure and other cloud services grew by 31%, with 7 percentage points attributed to AI. The acceleration in Azure growth has made near-term AI demand surpass available capacity, leading Microsoft to increase its capital expenditures to secure Nvidia GPUs for AI models.
Microsoft’s Productivity and Business Processes unit, containing Office software, LinkedIn, and Dynamics CRM, brought in $19.57 billion in revenue, up 12% and slightly exceeding expectations. The segment saw the launch of the Copilot AI tool for Microsoft 365 subscribers, with customers like Amgen signing up for thousands of seats. Microsoft also reported strong growth in its More Personal Computing segment, which includes Windows, Surface PCs, and Xbox, with a 62% increase in revenue from Xbox content and services.
The company introduced new Surface PCs with access to the Copilot chatbot and expanded access to Copilot for small businesses with Microsoft 365 subscriptions. Microsoft also made strategic hires to boost its AI capabilities, including Mustafa Suleyman, former co-founder of DeepMind, to lead a new Microsoft AI group. Additionally, the company completed a deal reportedly worth $650 million to acquire Inflection, a startup focused on AI.
Microsoft’s GitHub Copilot code-generation tool reached 1.8 million paid subscribers, further enhancing its AI capabilities. The company continues to innovate in various areas, such as cloud services, productivity software, and gaming, driving revenue growth across different segments. With a strong performance in the fiscal third quarter and optimistic guidance for the fourth quarter, Microsoft’s stock rose by 5% in after-hours trading, reflecting confidence in the company’s strategic direction and growth prospects.
