Microsoft’s Q3 earnings outperformed expectations, driven by robust corporate demand for its Azure cloud-computing software and services. Shares surged by 5% in late trading as profits reached $2.45 per share and sales increased by 7.1% to $52.9 billion, surpassing the Bloomberg survey average estimates of $2.24 per share and $51 billion in revenue.
Azure’s revenue climbed 31%, excluding currency fluctuations, meeting predictions. Sales from commercial cloud products like Azure and Office productivity software rose 22% to $28.5 billion. CFO Amy Hood noted that Azure’s demand was spurred by deal renewals, and Microsoft was more successful in convincing customers to add new products, such as security software and Teams conferencing software, to their contracts upon renewal.
Despite sales growth decelerating to single digits, Microsoft’s products continued to draw customers in a challenging economy. The company also laid off 10,000 workers this year, including employees in key businesses like Azure and security software. Microsoft’s focus on AI investments, such as a reported $10 billion commitment to OpenAI, is expected to drive future sales of Azure, search ads, and office-productivity programs.
Microsoft’s shares soared to $291.30 in extended trading following the report, after closing at $275.42 in New York. The stock gained 20% in the quarter, driven by optimism for Microsoft’s new AI plans and products, compared to a 7% rise in the Standard & Poor’s 500 Index.
AI products aren’t significantly contributing to sales yet, but Hood reported promising initial signs of usage and customer demand. The company has retooled its Office, accounting, and security software to add AI features, and Microsoft’s AI-powered Bing search chatbot aims to challenge Google’s market dominance.
Azure, competing with Amazon and Google, has been Microsoft’s highest-profile business for years and its strongest growth engine. With AI attracting more investor attention, the focus on Azure results is expected to continue in the coming quarters, as Microsoft sells many of its AI services through Azure.
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