Microsoft results top forecasts, shares jump 8% as AI juices sales

The company forecast revenue in its main segments for the current quarter would match or top Wall Street targets. PHOTO: REUTERS

SAN FRANCISCO - Microsoft beat Wall Street’s estimates for quarterly revenue and profit on Tuesday, driven by growth in its cloud computing and Office productivity software businesses, with the tech giant saying artificial intelligence (AI) products were stimulating sales.

The company forecast revenue in its main segments for the current quarter would match or top Wall Street targets.

Shares gained 8.3 per cent in after-market trading following a report by Microsoft that profits were US$2.45 per share in the fiscal third quarter, beating Wall Street estimates of US$2.23, according to data from Refinitiv and up 10 per cent from the same quarter in 2022.

Revenue rose 7 per cent to US$52.9 billion (S$70.8 billion) in the quarter ended March, inching past the average analyst estimate of US$51.02 billion, according to Refinitiv.

The bulk of Microsoft sales still come from selling software and cloud computing services to customers.

But the company has grabbed headlines this year with its partnership with ChatGPT creator OpenAI and sprucing up the Bing search engine with AI.

Microsoft said growth at its cloud business Azure was 27 per cent in the latest reported quarter, beating analyst expectations for 26.6 per cent growth.

Chief executive Satya Nadella told investors on a conference call that the company had more than 2,500 Azure-OpenAI service customers and that described AI-powered features in a wide array of products.

Bing, long an also-ran to search engine to Google, has 100 million daily users and has seen downloads jump since the addition of AI features, Mr Nadella said.

Microsoft forecast revenue in the Intelligent Cloud unit for the current quarter, the fiscal fourth, of US$23.6 billion to US$23.9 billion compared with Wall Street’s average target of US$23.8 billion.

Analysts had expected a gloomy economic outlook to hit Microsoft’s Windows business, which depends heavily on personal computer sales that have sagged in recent quarters.

The sales drop in the segment was less severe than analysts expected, with Microsoft reporting revenue of US$13.3 billion versus analyst estimates of US$12.19 billion, according to Refinitiv data.

The company’s productivity segment, which includes its Office software and advertising sales for the LinkedIn social networking site, also beat analyst expectations with revenue of US$17.5 billion versus estimates of US$16.99 billion.

Overall revenue for the company’s cloud unit, which includes Azure as well as other services, was US$22.1 billion, slightly above estimates of US$21.85 billion. REUTERS

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