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Microsoft announces 33% increase in profit

Written by The Anand Market

Updated on:

Two weeks ago, Microsoft surpassed Apple as the most valuable public company. Last week, its market valuation exceeded $3 trillion. Next week, Satya Nadella will celebrate his 10th anniversary as CEO of the company.

For Microsoft, the pressure is on to continue delivering.

Investors particularly expect the company to benefit from what they see as its lead in artificial intelligence. It has invested billions of dollars in OpenAI, the startup behind chatbot ChatGPT, and has spent the last year working to integrate its AI systems into every product it offers. Microsoft told investors that AI wouldn’t start producing significant results until this year, but investors looked for early signs of how much of the hype would translate into sales.

On Tuesday, Microsoft gave signs that it was finding a path forward, posting revenue and profits that beat Wall Street expectations.

Revenue was $62 billion in the quarter ended December, up 18% from a year earlier. Profit reached $21.9 billion, up 33 percent.

“We have moved from talking about AI to applying AI at scale,” Nadella said in a statement.

Microsoft’s commercial cloud offerings brought in $33.7 billion overall, an increase of 24%.

Its flagship cloud computing product, Azure, grew 30%, faster than in the previous three quarters.

Commercial subscriptions to Microsoft’s cloud productivity suite, including Teams, Word and Excel, increased 17%.

Enterprise customers have only just begun to try Microsoft’s Copilot offering, which integrates AI tools into these productivity programs. These upgrades became widely available in November and cost $30 per user per month, so even “modest” adoption of the offering can create “significant” increases in what customers pay each month, they said. Bank of America analysts wrote in a recent note to investors.

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The New York Times sued Microsoft and its partner OpenAI for using copyrighted material to develop AI technologies. In an interview with “NBC Nightly News” that aired Tuesday night, Mr. Nadella said it was clear “you can’t just take copyrighted material and regurgitate it,” but he added that copyright laws “must now be interpreted primarily as a new transformative technology,” according to a transcript.

Gaming has become Microsoft’s most important consumer business, and the results include the first quarter in which game publisher Activision Blizzard was part of Microsoft. After a year and a half of regulatory reviews around the world, the company closed the $69 billion deal to buy Activision in October.

Microsoft cut 1,900 jobs in its games division last week, largely from employees brought in through the acquisition.