Microsoft reports a 33% profit increase
Two weeks ago, Microsoft topped Apple as the most valuable listed company. Last week it surpassed the market value of $3 trillion. Next week, Satya Nadella will celebrate his tenth anniversary as CEO of the company.
For Microsoft, the pressure to continue delivering is great.
In particular, investors are looking for a way for the company to capitalize on what they see as its leading position in artificial intelligence. It has invested billions of dollars in OpenAI, the startup behind the ChatGPT chatbot, and has spent the past year racing to integrate its AI systems into every product it offers. Microsoft has told investors that AI won't deliver meaningful results until this year, but investors have been looking for early signs of how much the hype will generate revenue.
On Tuesday, Microsoft gave signals that it is finding a way forward, as it posted revenue and profit that exceeded Wall Street expectations.
Sales reached $62 billion in the three months ending in December, up 18 percent from a year earlier. Profits were $21.9 billion, an increase of 33 percent.
“We have gone from talking about AI to deploying AI at scale,” Mr. Nadella said in a statement.
Microsoft's commercial cloud offering broadly grossed $33.7 billion, up 24 percent.
Its flagship cloud computing business, Azure, grew 30 percent faster than in the previous three quarters.
Commercial subscriptions to Microsoft's cloud productivity suite, including Teams, Word and Excel, rose 17 percent.
Business customers are just starting to try out Microsoft's Copilot offering, which integrates AI tools into these productivity programs. These upgrades became generally available in November and cost $30 per user per month, so even a “modest” adoption of the offering could create a “meaningful” increase in what customers pay each month, Bank of America analysts wrote in a recent note to investors.
The New York Times has sued Microsoft and its partner OpenAI for using copyrighted material to develop AI technologies. In an interview with “NBC Nightly News” that aired Tuesday evening, Mr. Nadella said it was clear “you can't just take copyrighted material and regurgitate it,” but added that copyright laws “now essentially have to be interpreted for what a new transformation technology,” a transcript said.
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 scrutiny around the world, the company closed the $69 billion deal to buy Activision in October.
Microsoft last week cut 1,900 jobs in its gaming division, largely those of employees acquired through the acquisition.