Microsoft reported a 10% increase in quarterly profits, driven by its cloud computing business, but fell short of some analyst expectations.
Why it matters: Microsoft’s cloud performance is crucial to its financial health and its ability to maintain leadership in artificial intelligence (AI) technology.
The details:
- Fiscal fourth-quarter profit was $22 billion, or $2.95 per share, slightly exceeding analyst expectations of $2.94 per share.
- Revenue for the April-June period was $64.7 billion, a 15% increase from last year, surpassing the forecasted $64.4 billion.
- Cloud computing business saw quarterly revenue rise 19% to $28.5 billion, falling short of some analyst expectations.
- Microsoft has integrated AI technology across all its business segments, including Azure cloud computing contracts, workplace software, and other products.
The company’s stock dropped about 5% in after-hours trading on Tuesday following the release of the earnings report.
Other segments:
- Revenue from productivity services, including the Office product line, rose 11% to $20.3 billion.
- The personal computing segment, mainly driven by Windows operating system licensing, generated $15.9 billion for the quarter, a 14% increase from the previous year.
The big picture: Microsoft’s investments in AI, particularly its multibillion-dollar partnership with OpenAI, the company behind ChatGPT, are expected to play a significant role in its future growth and market position.
What’s next: Investors and analysts will closely monitor Microsoft’s ability to accelerate cloud growth and meet expectations in the highly competitive cloud market, as well as its ongoing AI initiatives.
Full story
Microsoft CFO Amy Hood guidance for Q2 FY25:
• Windows OEM: "flat in line with PC market"
• Xbox content and services: "low to mid 50s, driven by Activision"
• Gaming : "mid 30s, 40 points from Activision"
• Xbox hardware: "will again decline YoY"https://t.co/UnRQOfmImS— Tom Warren (@tomwarren) July 30, 2024
Microsoft reported a 10% increase in quarterly profits on Tuesday, as it seeks to maintain its leadership in artificial intelligence (AI) technology. The software giant announced a fiscal fourth-quarter profit of $22 billion, or $2.95 per share, slightly exceeding analyst expectations of $2.94 per share. Revenue for the April-June period was $64.7 billion, marking a 15% increase from last year.
Analysts polled by FactSet Research had forecasted revenue of $64.4 billion. The growth was primarily driven by Microsoft’s cloud computing business, which saw quarterly revenue rise 19% to $28.5 billion.
Microsoft profits reflect strong cloud revenue
Xbox hardware revenue for Microsoft's FY24:
• Q1: Xbox hardware down 7% ❌
• Q2: Xbox hardware up 3% (holiday Q) ✅
• Q3: Xbox hardware down 31% ❌
• Q4: Xbox hardware down 42% ❌https://t.co/UnRQOfngcq pic.twitter.com/qryHKiOrUg— Tom Warren (@tomwarren) July 30, 2024
Microsoft fiscal Q4 cloud growth is light and investors are not liking it https://t.co/GCN0rqUtgq
— Jordan Novet (@jordannovet) July 30, 2024
Despite this strong performance, it fell short of some analyst expectations, causing the stock to drop about 5% in after-hours trading on Tuesday. Based in Redmond, Washington, Microsoft does not report revenue specifically from AI products but has integrated AI technology across all its business segments. This includes Azure cloud computing contracts, workplace software, and other products.
A significant portion of this generative AI technology stems from Microsoft’s multibillion-dollar investments in OpenAI, the company behind ChatGPT. Revenue from Microsoft’s productivity services, including its Office product line, rose 11% to $20.3 billion.
Azure grew 30% overall, and 8% from AI. Growth is constrained by capacity. It's wild that growth in AI-driven revenue is limited by building new buildings and trucking in GPUs.
AI is definitely high on hype, but it's driving business.https://t.co/7lw4NdZTp7
— Glenn K. Lockwood (@glennklockwood) July 31, 2024
Additionally, the personal computing segment, mainly driven by Windows operating system licensing, generated $15.9 billion for the quarter, a 14% increase from the previous year.
- Fortune.”Microsoft’s cloud business is powering its profits—but there’s still some disappointment”.
- Yahoo.”Microsoft to report fiscal Q4 earnings as Wall Street eyes AI revenue and spending”.
- FT.”Microsoft’s slower cloud growth fails to impress Wall Street”.