Microsoft’s Q1 profits rose 18% thanks to AI and cloud computing

Microsoft’s cloud computing and artificial intelligence business helped deliver $70.1 billion in sales and boosted profits by 18% for the January-March quarter, a dose of relief for investors during a turbulent time for the tech sector and U.S. economy.

The company reported quarterly net income of $25.8 billion, or $3.46 per share, beating Wall Street expectations for earnings of $3.22 a share.

The Redmond, Washington-based software maker posted revenue of $70.1 billion in the period, its third fiscal quarter, up 13% from the same period a year ago and also beating Wall Street expectations. Analysts polled by FactSet expected Microsoft to post revenue of $68.44 billion for the quarter.

Microsoft CEO Satya Nadella credited cloud growth for its strong quarter. The company’s cloud unit posted revenue of $26.8 billion, compared with expectations of $26.17 billion.

“Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth,” Nadella said in a statement.

The company also saw a 6% increase in revenue in its personal computing unit, which includes its laptop business and Xbox services.

Nadella noted on a call with investors that demand for cloud and artificial intelligence remained strong. He said Microsoft is constantly tweaking its investments based on efficiency improvements in computing systems and what kind of services customers want.

“We just want to make sure we are accounting for the latest and greatest information,” he said.

Microsoft is among a group of the tech industry’s bellwether companies that have been through a period of uncertainty and turmoil since President Donald Trump returned to the White House, with a see-sawing of stocks that has eviscerated trillions of dollars in shareholder wealth amid an onslaught of tariffs and other actions.

Microsoft’s stock price has dropped nearly 8% since Trump’s inauguration in January, to about $395 at the close of markets Wednesday. But investors appeared pleased moments later after Microsoft released its earnings report, sending stocks up more than 6% in after-hours trading.

Revenue from Microsoft’s cloud computing business segment grew 21%, to $26.8 billion, also beating Wall Street projections.

The company felt more tariff uncertainty in its personal computing business, which is centered around its Windows operating system and the fees it collects from computer makers that put it on the hardware they sell. Revenue from that business was $13.4 billion for the quarter, up 6% from the first three months of last year.