(Reuters) – Microsoft Corporation (MSFT.O) beat Wall Street estimates for quarterly revenue and profit on Tuesday, driven by growth in its cloud computing and Office productivity software business, and Microsoft said artificial intelligence products were driving sales.
The company expects revenue in its key segments for the current quarter to match or beat Wall Street’s targets.
Shares rose 8.3% in after-market trading after a report from Redmond, Washington, reported that earnings were $2.45 per share in the fiscal third quarter, beating Wall Street’s estimate of $2.23, according to Refinitiv data and up 10% from the same value. . quarter of last year.
In regular trading, concerns about earnings sent Microsoft down 2.2%, making it the biggest drag on the S&P 500 on the Tuesday ahead of its report.
Revenue rose 7% to $52.9 billion in the quarter ending in March, beating analysts’ average estimate of $51.02 billion, according to Refinitiv. The bulk of Microsoft’s sales still comes from selling software and cloud computing services to customers.
But the company made headlines this year with its partnership with ChatGPT creator OpenAI and the AI facelift of the Bing search engine.
Microsoft said growth in its Azure cloud business was 27% in the most recent reported quarter, beating analyst expectations for 26.6% growth, according to a consensus of 23 analysts polled by Visible Alpha.
CEO Satya Nadella told investors on a conference call that the company has more than 2,500 Azure-OpenAI service customers and described AI-powered features in a wide range of products.
Nadella said that Bing, which is also a longtime Google search engine, has 100 million daily users and has seen an increase in downloads since adding the AI features.
Microsoft forecast revenue in its smart cloud unit for the current quarter, fiscal fourth quarter, to be $23.6-23.9 billion compared to the Wall Street average target of $23.8 billion, according to Refinitiv.
It saw revenue in the personal computing segment of more than $13.35-13.75 billion, which would beat Wall Street’s estimate of $13.2 billion. The productivity and business operations unit, which includes Office, was seen generating between $17.9 and $18.2 billion in revenue, which was well above analysts’ average target of $17.8 billion.
Analysts expected the bleak economic outlook to hurt Microsoft’s Windows business, which relies heavily on PC sales that have slumped in recent quarters. The sales decline in this segment was less severe than analysts expected, with Microsoft reporting revenue of $13.3 billion versus analyst estimates of $12.19 billion, according to Refinitiv data.
The company’s productivity segment, which includes Office software and advertising sales for the social networking site LinkedIn, also beat analyst expectations with revenue of $17.5 billion versus estimates of $16.99 billion, according to Refinitiv.
Total revenue for the company’s cloud unit, which includes Azure as well as other services, was $22.1 billion, slightly more than estimates of $21.85 billion, according to Refinitiv data.
Alphabet Inc (GOOGL.O), which also owns a large cloud business, reported strong results Tuesday, with its shares up 2.4% after the decision bell. The results and Microsoft helped boost shares of Amazon.com Inc (AMZN.O), another major cloud player, up 4.8% in after-hours trading.
Additional reporting by Yuvraj Malik in Bengaluru; Editing by Magu Samuel and David Gregorio
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