Microsoft outpaced expectations for its third-quarter revenue and profit, unveiled on Thursday. This success was largely fueled by the integration of artificial intelligence (AI) across its cloud services, propelling its shares to surge by more than 4 per cent during extended trading.
The tech giant’s revenue soared by 17 per cent from the previous year, reaching an impressive $61.9 billion, exceeding analysts’ projections of $60.80 billion. Earnings per share stood at $2.94, surpassing the target set by Wall Street at $2.82.
“We reiterate our BUY rating on Microsoft and $500 price target following a strong 3Q24 quarter that was marked by a further reacceleration in Azure along with increasing contribution to cloud growth from Azure AI Services,” said Alex Platt, Research Associate at D.A. Davidson.
“This quarter illustrated how demand remains high for generative AI from Microsoft customers, and we continue to believe that Microsoft sits as a leader and significant beneficiary in this GenAI environment, whether that’s from their diverse offerings from AI cloud services to consumer-facing products and features, or continued innovation in AI research that is driving the space forward.”
Additionally, its net income marked a robust 20 per cent increase, reaching $21.9 billion. Following the announcement, Microsoft’s shares experienced a notable uptick, climbing over 4 per cent to reach $416.25 in the extended session.
Another notable highlight was the remarkable 17 per cent growth in revenue from the More Personal Computing unit, which reached $15.6 billion, surpassing analysts’ expectations of $15.08 billion.
Furthermore, Microsoft’s capital expenditures, driven by AI initiatives, exceeded analysts’ estimates by nearly $1 billion in the third quarter. Capital expenditures surged from $11.5 billion in the previous quarter to $14 billion, surpassing estimates of $13.14 billion, as reported by Visible Alpha.
Microsoft’s strategic partnership with OpenAI, the developer of ChatGPT, has significantly bolstered its position in the AI landscape.
By integrating OpenAI’s technology into its products, such as Copilot, AI assistants embedded within key offerings like Microsoft 365, the company has experienced remarkable success.
Moreover, the increasing demand for Microsoft’s cloud services has been further amplified by artificial intelligence.
One of the key highlights of Microsoft’s earnings report was the impressive 31 per cent growth in Azure cloud-computing revenue, surpassing both the FactSet consensus view of 28.5 per cent and the anticipated growth rate of 29 per cent to 30 per cent.
The positive financial results from Microsoft, alongside those of Alphabet, provided a much-needed boost to the technology sector, particularly following Meta’s announcement of increased spending to support its artificial intelligence infrastructure the previous day.
Looking ahead, Microsoft anticipates revenues in the range of $63.5 billion to $64.5 billion for the quarter ending in June.
Its remarkable success in the realm of AI has propelled its market value above $3 trillion, surpassing that of Apple, making it the world’s largest company by market capitalization.
Over the past year, Microsoft’s stock has experienced a remarkable surge of 45 per cent, outperforming both the Nasdaq Composite Index, which rose by 32 per cent, and Apple shares, which gained 4 per cent.