Investing.com — Shares in Microsoft (NASDAQ:) edged higher in premarket U.S. trading on Friday after the software giant reported fiscal third-quarter results that beat Wall Street estimates.
The Seattle-based group has been a seen as a frontrunner in the race to establish dominance in generative artificial intelligence thanks in large part to a $13 billion investment in ChatGPT-maker OpenAI. Further evidence of its strong position was borne out in strong demand for Microsoft’s AI-powered services, a trend that underpinned a better-than-expected quarterly performance at its key Azure cloud business.
For the three months ended Mar. 31, the company announced earnings of $2.94 a share on revenue of $61.9 billion. Analysts polled by Investing.com anticipated per-share income of $2.82 on revenue of $60.84B.
When excluding currency effects, revenue at Azure and other cloud services grew 31% from a year earlier, beating analyst estimates for an uptick of 28.6%. About 7% of the growth came from AI, signalling that Microsoft may be benefitting from a continued ramp-up in spending on the nascent technology.
“This leaves no doubt that the company is leaps and bounds ahead of everyone in the segments that matter to the market right now and, most importantly, is on the right path toward increasing this lead,” Investing.com senior analyst Thomas Monteiro said Thursday.
“While several tech companies failed to keep on growing at the same pace as in the past quarters due to the widespread margin shrinkage both on the costs and revenue sides, Microsoft’s AI and cloud growth numbers show that the company managed to sail through the quarter unphased,” Monteiro added.
Chief Financial Officer Amy Hood also said that capital expenditures would increase “materially” to help meet demand for its generative AI offerings, which analysts at Bernstein interpreted as a sign that the company’s executives have a “line-of-sight” to a “significant” uptick in cloud revenue.
“We also see this as an indicator that Microsoft has taken the AI mantel, and Azure could become the biggest and more important hyperscaler provider,” the Bernstein analysts said in a note to clients. “If this trend continues, then AI will be a large driver of Azure’s long term revenue and will require re-evaluation up of Azure’s potential size.”
Yasin Ebrahim contributed to this report.
