Microsoft's cloud business played a big role in driving overall growth for the tech giant in the latest quarter, as more customers used the company's cloud services for their AI-powered platforms and tools.
Microsoft cloud revenue in the first-fiscal quarter was $38.9 billion, up 22% year-over-year.
Much of that growth came from Microsoft Azure, the company's public cloud computing platform, which saw 33% growth in revenue. Meanwhile, Microsoft 365 Commercial products and cloud services revenue increased 13%, or up 14% in constant currency.
Overall, Microsoft's revenue for the quarter ending Sept. 30 was $65.6 billion, a 16% increase, or about $1 billion more than analysts had expected.
“AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," Microsoft CEO Satya Nadella said in a statement. “We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage.”
In after-hours trading on Wednesday, Microsoft's shares rose just under 1% to $436. But later, a disappointing outlook for Azure growth in the current quarter—31% to 32% growth in the current quarter, versus 33% in the just reported one—sent the company's stock into reverse, down 4%.
Yesterday, Google's cloud business also made a major contribution to the double-digit revenue gains at parent Alphabet, as CEO Sundar Pichai said his huge investment in AI is paying off. The company's cloud revenue for the quarter hit $11.3 billion, an increase of 34%.
During a call with analysts, Pichai repeatedly cited the number of people and companies using Google's AI, which runs on its Gemini large language models, in various tools.
Encouraged by the cloud results, investors sent Alphabet's shares up nearly 3% in regular trading on Wednesday, to $176.14.
Microsoft, Google, and Amazon are in a fierce battle for cloud dominance since it became clear that generative AI could propel growth in cloud services, as developers looked to build and expand the use of generative AI chatbots and other applications in the cloud.
