Microsoft saw its biggest profit growth in the last quarter in more than 2 years. Excitement about artificial intelligence helped boost the growing demand for cloud services.
Microsoft’s net income grew by 33% to USD 21.9 billion in the three months through December.
This is the highest expansion for the Tech giant since the quarter ending September 2021. Last week, during an earnings call with investors, Microsoft Chief Executive Satya Nadella said, "A growing body of evidence shows AI's role in transforming how we work." Microsoft has been doing exceptionally well since last year. Industry experts and investors are optimistic about Microsoft. They believe AI-driven products will transform the industry.
Analysts have predicted that Microsoft will surpass Apple. They predict it will become the company with the world's highest market cap. Last week, it reached the 3 trillion dollar mark in market capitalization. It's only the second company to do so.
This indicates the company's financial prospects are excellent. Investors expect great earnings. This is due to the anticipated earnings in AI and cloud services will be great. The financial results of Microsoft came after a week of BigTech quarterly earnings reports. The industry as a whole has performed well on the stock market indices.
Alphabet, the parent company of Google, has a revenue growth of more than 13%. Yet, it fell short of estimates by analysts. Microsoft stock grew by more than 70% on the Nasdaq over the last 12 months. Nasdaq grew by 40%.
Microsoft’s Azure grew by 30% beating estimates of 27% in the cloud business. Microsoft's partnership with OpenAI has generated interest from many people. They are working together in the AI-driven cloud services business. Azure’s growth has been great and nearly 6 percentage points because of AI. It was double the amount AI gave Azure in the last quarter.
Google and Microsoft fiercely compete in generative AI. Investors are keenly interested in AI's business prospects. Microsoft’s revenue for its fiscal second quarter was USD 62 billion, up 18% from analyst estimates of 16%. The Activision Blizzard acquisition grew the sales revenue by 4 percentage points.
The pandemic was a boon for Big Tech as work moved online and the Tech titans showed sharp growth. However, they had to manage a slowdown after the pandemic. They reduced staff and other overheads at that time.
The industry has been in the news for job cuts and reducing headcounts. Google, Microsoft, and Salesforce have been lately in the news for this reason. In addition to Azure cloud services, Microsoft's AI strategy is called co-pilot. It comprises a series of AI assistants. They are powered by the same technology behind ChatGPT.
Office 365 includes Co-pilot along with Excel, Teams, and Word. Analysts are very optimistic about Co-pilot. It performs tasks like generating emails and summarizing video calls. AI-powered upgrades make it a brand-new revenue stream. Both Microsoft and analysts' estimates align with USD 61 billion in sales.
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