Microsoft’s Q3 results today clearly showcased how the tech giant’s big bet on artificial intelligence (AI) has paid off. The Silicon Valley major’s cloud business soared in the September quarter, largely on anticipation of cloud product Azure’s new AI incorporations.
Speaking to analysts, Microsoft CFO Amy Hood said that demand for AI was the driving factor for a “3 percentage point boost” to the company’s cloud business.
According to Brett Iversen, Microsoft’s vice president for investor relations, consumer anticipation of AI services has been key factor in quarterly sales growth for the cloud business.
After results were declared on October 24, the Windows makers saw shares surge by 5 percent in after trading hours.
Aggressive Strategy
Microsoft has emerged as an AI services leader with heavy investments and collaborations with OpenAI, the maker of ChatGPT. The company has promised to go full force to meet AI demand, Reuters reported.
The tech giant is integrating OpenAI’s technology into its product catalog and search engine Bing. Colaboration is also ongoing for coding platform Github and office software Microsoft 365, the report added.
In terms of capital expenditure, in Q3 the company saw $11.2 billion spent, compared to $10.7 billion quarter-on-quarter (QoQ) basis. The September quarter spend is also its highest since 2016.
Executives has indicated the figure is likely to cross $44 billion this fiscal, over each quarter.
Further, Microsoft has forecast an estimated growth rate of 26-27 percent for Azure, against analysts expectation of 25.1 percent; and revenue forecast of $25.1-25.4 billion for the cloud segment against estimates of $24.94 billion, it said.
Experts Speak
Bob O’Donnell, chief analyst at TECHnalysis Research said that while its still premature to determine major trends from a single quarter’s results, the September numbers do showcase that Azure is gaining marekt share from competitors. He added that Microsoft’s Copilot and GenAI pilot projects are also driving buzz and “getting companies to consider them (Microsoft) in a more serious way”.
“The results indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth,” said Jesse Cohen, senior analyst at Investing.com.
“What AI is doing … is opening up either new conversations or extending existing conversations or getting us back in touch with customers that we maybe weren’t doing as much with,” Iversen told Reuters.
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Updated: 25 Oct 2023, 12:02 PM IST
