Microsoft’s quarterly earnings jump 20% as tech company continues to beat forecast with AI push

Microsoft CEO Satya Nadella. Image Credit: Reuters

Microsoft reported a significant increase in profit for the January-March quarter, marking a 20 per cent rise as it focuses on leveraging artificial intelligence (AI) to enhance workplace productivity.

The company’s quarterly net income reached $21.93 billion, or $2.94 per share, surpassing Wall Street estimates.

Revenue for the period, totalling $61.86 billion, rose by 17 per cent compared to the same period last year, outperforming analysts’ expectations of $60.86 billion.

Microsoft’s cloud computing segment generated $26.7 billion in revenue, a 21 per cent increase from the previous year, while revenue from productivity services, including Office products, rose by 12 per cent to $19.6 billion.

Although Microsoft doesn’t disclose specific earnings from AI products, it integrates AI technology into various aspects of its business, such as cloud computing contracts and online services subscriptions.

The company offers Copilot, a flagship chatbot, to businesses for $30 per employee monthly, enhancing workplace productivity.

Gartner analyst Jason Wong noted that while there’s strong interest among Microsoft’s customers in exploring generative AI, many lack a clear plan for its practical application, making it an early-stage endeavour.

Microsoft’s investments in AI include partnerships with OpenAI, developer of ChatGPT, and the recent introduction of Phi-3, a new set of leaner AI language models. However, some partnerships are under regulatory scrutiny over concerns about potential competition issues in the AI industry.

Despite efforts to promote an AI-driven future, Microsoft faces challenges in addressing security issues within its legacy computer services.

A federal cybersecurity safety board criticized the company’s cybersecurity practices and corporate culture following a breach that allowed state-backed Chinese cyber operators to access the email accounts of senior U.S. officials.

The company’s personal computing business, focused on Windows operating system licensing, generated $15.6 billion in revenue for the quarter, a 17 per cent increase from the previous year. Microsoft’s stock rose approximately 4 per cent in after-hours trading following the earnings announcement.

Looking ahead, Microsoft anticipates increased spending to expand infrastructure for AI systems, as demand for AI continues to grow beyond its current capacity. Chief Financial Officer Amy Hood emphasized the company’s commitment to meeting this demand during an earnings call.

(With inputs from agencies)