Microsoft beat Wall Street estimates for second-quarter revenue on Tuesday, as new AI features helped attract customers to its cloud and Windows services.
Microsoft shares fell 1% in after-hours trading. They climbed 57% last year. Along with a rally in other tech stocks, including Alphabet and Nvidia, Microsoft helped fuel a 24% surge in the S&P 500 in 2023.
Revenue grew 18% to $62 billion in the quarter ended December 31, compared with the average analyst estimate of $61.12 billion, according to LSEG data.
Revenue at Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, grew 20% to $25.9 billion. Sales of Azure, for which Microsoft does not disclose a dollar figure, grew 30%, compared with a 27.7% consensus estimate from Visible Alpha.
Investors are watching Microsoft’s Azure and Office revenues closely to see what kind of sales flow come from the tens of billions of dollars the company plans to pour into data centers this year to deliver generative AI.
Shares of Microsoft have surged this year, helping it briefly top its rival Apple as the world’s most-valuable listed company earlier this month. Investors have rewarded the company’s push into AI and strategic partnership with Silicon Valley startup and ChatGPT creator OpenAI.
Microsoft’s share surge was not dented by a power struggle within OpenAI that highlighted the software giant’s lack of direct control over its important partner. Microsoft also faces some legal and regulatory challenges.
In November, Microsoft started selling Copilot, an AI assistant that can summarize an email inbox or craft a slide show, for $30 per month, which analysts say is a premium price.
Early sales of the product showed up in the firm’s commercial sales of Office software, where revenue grew 17%, compared with analyst expectations of commercial Office sales growth of 14.2%, according to data from Visible Alpha. Microsoft does not provide an absolute dollar figure for the sales.
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