Microsoft (NASDAQ:MSFT) has exceeded Wall Street expectations in its fiscal first-quarter results across all segments, with growth in its cloud computing and PC businesses driven by increasing interest in its artificial intelligence (AI) offerings. Microsoft’s revenue for the quarter ending September 30 reached $56.5 billion, a 13% increase compared to analysts’ consensus estimate of $54.52 billion.
The company’s Intelligent Cloud unit, which houses its Azure cloud-computing platform, reported revenue of $24.3 billion, surpassing analysts’ expectations of $23.49 billion. Azure revenue grew by 29%, outperforming the 26.2% growth estimate from market research firm Visible Alpha.
According to Brett Iversen, Microsoft’s Vice President for Investor Relations, much of the quarterly sales growth came from customers rekindling their use of Microsoft’s cloud services in anticipation of using AI services. The integration of AI into Microsoft’s products, such as the “Copilot” tool for its Microsoft 365 service, has sparked interest among businesses. The Copilot tool summarizes a day’s worth of emails into a quick update and requires companies to make upgrades to their Microsoft-based systems to use it.
While Google-parent Alphabet’s cloud division missed estimates for third-quarter revenue, Microsoft’s strong messaging on its AI technology appears to be resonating with businesses. Investors are also keeping an eye on Microsoft’s capital expenditures for its data centers to power AI software, which increased to $11.2 billion in the first quarter.
Sales of Microsoft’s Windows operating system and other products in the segment grew to $13.7 billion, exceeding analysts’ consensus estimate of $12.82 billion. The segment containing the LinkedIn social network and office productivity software also saw growth, reaching $18.6 billion compared to an estimate of $18.20 billion.
For the fiscal second quarter, Microsoft forecasts an Azure growth rate of 26-27% in constant currency, ahead of analyst estimates. The company also anticipates strong revenue for its business segments containing Azure, Windows, and LinkedIn, indicating a positive outlook for the AI-driven tech giant.
Investors and analysts will continue to monitor Microsoft’s AI initiatives, capital expenditures, and the impact of its AI products on sales and growth.
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