Microsoft exceeded expectations for its third-quarter revenue and profit, driven by significant growth in its cloud computing and Office productivity software businesses. The Redmond, Washington-based company's profits reached $2.45 per share, beating Wall Street's estimate of $2.23, and revenue rose 7 per cent to $52.9 billion, inching past the average analyst estimate of $51.02 billion, according to Refinitiv.
The company's shares rose by 4.6 per cent in after-market trading following the announcement, and the strong results helped boost shares of Amazon, another major cloud operator, by 2.4 per cent in after-hours trading. Similarly, Alphabet, which also has a large cloud business, reported strong results, lifting its shares 3 per cent after the bell.
Microsoft's cloud business Azure experienced a 27 per cent growth in the latest reported quarter, surpassing analysts' expectations for 26.6 per cent growth. Its productivity segment, which includes its Office software and advertising sales for the LinkedIn social networking site, also exceeded analyst expectations with revenue of $17.5 billion versus estimates of $16.99 billion, according to Refinitiv.
Despite the challenging overall macroeconomic environment, Microsoft's revenue for the Windows business was $13.3 billion, which was less severe than analysts expected. The segment's sales depend heavily on PC sales, which have sagged in recent quarters.
Brett Iversen, Microsoft’s head of investor relations, said that AI is still a relatively small part of Microsoft's total business, despite its partnership with ChatGPT creator OpenAI and the recent enhancements to the Bing search engine using artificial intelligence technology. He noted that it's still early days for AI, but the innovation is happening, and the excitement is high.
Overall, Microsoft's cloud unit, which includes Azure as well as other services, reported revenue of $22.1 billion, slightly above estimates of $21.85 billion, according to Refinitiv data. While the bulk of Microsoft's sales still come from selling software and cloud computing services to customers, the company's continued growth in its cloud business is a significant contributor to its strong performance in the third quarter.
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