By Yuvraj Malik, Anna Tong and Stephen Nellis
(Reuters) – Microsoft beat Wall Street estimates for third-quarter revenue and profit on Thursday, driven by gains from AI adoption across its cloud services, and the company’s shares jumped over 4% in extended trade.
Revenue rose 17% to $61.9 billion in the quarter ended March, exceeding the consensus estimate of $60.80 billion, according to LSEG data. Earnings per share of $2.94 topped Wall Street’s target of $2.82.
The rise in Microsoft shares after the bell lifted the company’s stock market value by $128 billion.
The stock has soared on Microsoft shipping generative AI (genAI) tools based on its strategic partnership with ChatGPT creator OpenAI and also helped it capture the world’s most valuable company crown from Apple this year.
Microsoft’s strong profit and revenue offset concerns about higher-than-expected AI-fueled capital expenditures. On Wednesday, Meta’s lower-than-anticipated revenue forecast and guidance for higher expenses driven by surging AI costs knocked $200 billion off the Facebook and Instagram parent’s market value.
“We’re continuing to see customer demand grow quite a bit,” Brett Iversen, Microsoft’s vice president of investor relations told Reuters. “And so we’re making sure to scale our available capacity in line with that.”
Revenue from Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, rose to $26.7 billion, passing the average estimate of $26.24 billion, LSEG data showed.
Azure revenue rose 31%, higher than a 29% growth estimate from market research firm Visible Alpha.
Microsoft does not break out the absolute revenue figure for Azure, the part of its business best situated to capitalize on booming interest in artificial intelligence.
The Copilot tool, a set of genAI assistants launched in November for $30 a month, has lifted Microsoft’s enterprise software and Windows businesses. A recovery in personal computer sales was also a factor.
The More Personal Computing unit revenue increased 17% to $15.6 billion, surpassing analyst expectations of $15.08 billion, according to data from LSEG.
Productivity and Business Processes, Microsoft’s unit that houses office software and LinkedIn, increased revenue 12% to $19.6 billion. Analysts had estimated $19.54 billion, according to data from LSEG.
Microsoft has been spending heavily to support its AI services, and capital expenditures grew from $11.5 billion in the previous quarter to $14 billion, passing estimates of $13.14 billion, according to Visible Alpha.
(This story has been corrected to fix the Microsoft spokesman’s name to Brett Iversen, not Iverson, in paragraph 6)
(Reporting by Yuvraj Malik in Bengaluru; Editing by Sriraj Kalluvila and David Gregorio)
