Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Street
The Street
Business
Martin Baccardax

Microsoft earnings harness AI power as Azure cloud gains, outlook impress

Microsoft (MSFT) -) shares powered higher in pre-market trading after the tech giant posted stronger-than-expected first quarter earnings it said was powered in part by its early investments in AI. 

Microsoft's flagship cloud offering, Azure, saw a huge increase in customers are the group rolled out AI features linked to its $10 billion investment in Chat GPT creator Open AI earlier this year. 

Azure revenues were up 29% from last year, outpacing the 19% gain for its broader Intelligent Cloud division and the 12.7% advance in overall group revenues, which topped Street forecasts at $56.52 billion.

Microsoft said it sees Azure growth rates of between 26% and 27% for the current quarter, with revenues for the Intelligent Cloud division pegged between $25.1 billion and $25.4 billion.

"More than 18,000 organizations now use Azure OpenAI service, including new-to-Azure customers," CEO Satya Nadella told investors on a conference call late Tuesday. "And we are expanding our reach with digital-first companies to power their AI solutions, therefore, making them Azure customers as well."

"We're using this AI inflection point to redefine our role in business applications," he added. 

Microsoft shares were marked 2.8% higher in early Wednesday trading to change hands at $339.87 each, a move that would extend the stock's year-to-date gain to around 43%. 

Microsoft's adjusted earnings rose 27.2% from last year to $2.99 per share, well ahead of the Street consensus forecast of $2.65 per share. Net income rose 20% to $20.1 billion.

Productivity and business division revenues, which includes Office 365, were up 13% from last year to $24.3 billion, Microsoft said, while More Personal Computing revenues, which includes Windows, were up 3% to $13.7 billion

"We believe that over 50% of the Microsoft installed base will ultimately use the AI functionality for the enterprise/commercial landscape which represents a major monetization opportunity and we are now seeing this play out as we head into year-end," said Wedbush analyst Dan Ives, who carries an 'outperform' rating with a $400 price target on the stock.

  • Action Alerts PLUS offers expert portfolio guidance to help you make informed investing decisions. Sign up now.
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.