Microsoft earnings beat forecasts, shares jump 8% as AI juice sales rise

April 25 (Reuters) – Microsoft Corp (MSFT.O) beat Wall Street’s quarterly revenue and profit estimates on Tuesday, driven by growth in its cloud computing and Office productivity software businesses, and Microsoft said that artificial intelligence products were driving sales.

The company expects revenue from its major segments for the current quarter to meet or exceed Wall Street targets.

Shares gained 8.3% in aftermarket trading following a report from Redmond, Wash.-based Microsoft that reported earnings of $2.45 per share in the fiscal third quarter, beating estimates of $2.23, according to Refinitiv data and up 10% from the same quarter last year.

In regular trading, earnings fears sent Microsoft down 2.2%, making it the biggest drag on the S&P 500 on Tuesday ahead of its report.

Revenue rose 7% to $52.9 billion in the quarter ended March, slightly beating analysts’ average estimate of $51.02 billion, according to Refinitiv. The bulk of Microsoft’s sales still come from selling cloud computing software and services to customers.

But the company made headlines this year with its partnership with ChatGPT creator OpenAI and enhancing the Bing search engine with artificial intelligence technology.

Microsoft said its Azure cloud business grew 27% in the last reported quarter, beating analyst expectations for growth of 26.6%, according to the consensus of 23 analysts surveyed by Visible Alpha.

Chief Executive 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.

Bing, a longtime Google search engine, has 100 million daily users and has seen downloads jump since the AI ​​features were added, Nadella said.

Microsoft forecasts revenue from the Intelligent Cloud unit for the current quarter, fiscal year four, of $23.6 billion to $23.9 billion compared to Wall Street’s average target of $23.8 billion, according to Refinitiv.

It recorded revenues in the More Personal Computing segment of $13.35 billion to $13.75 billion, which would exceed Wall Street’s estimate of $13.2 billion. The Productivity and Business Processes unit, which includes Office, generated revenue of $17.9 billion to $18.2 billion, which would exceed analysts’ average target of $17.8 billion.

Analysts had expected a bleak economic outlook to hit Microsoft’s Windows business, which is heavily dependent on PC sales that have faltered in recent quarters. The drop in sales in the segment was less severe than analysts expected, with Microsoft reporting revenue of $13.3 billion against analyst estimates of $12.19 billion, according to Refinitiv data. .

The company’s productivity segment, which includes its Office software and advertising sales for social networking site LinkedIn, also beat analysts’ expectations with revenue of $17.5 billion against estimates. $16.99 billion, according to Refinitiv.

Overall revenue for the company’s cloud unit, which includes Azure along with other services, was $22.1 billion, slightly above estimates of $21.85 billion. dollars, according to Refinitiv data.

Alphabet Inc (GOOGL.O), which also has a large cloud business, reported strong results on Tuesday, rising its shares 2.4% after the bell. Those results and those of Microsoft helped boost shares of Inc (AMZN.O), another major cloud operator, by 4.8% in after-hours trading.

Reporting by Yuvraj Malik in Bengaluru; Editing by Maju Samuel and David Gregory

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Jane Lee

Thomson Reuters

Reports on global trends in computing, from coverage of semiconductors and the tools to manufacture them to quantum computing. Has 27 years of reporting experience in South Korea, China and the United States and previously worked for the Asian Wall Street Journal, Dow Jones Newswires and Reuters TV. In her free time, she studies mathematics and physics in order to understand quantum physics.

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