Microsoft Beats Q3 Expectations with Cloud Dominance


Shares of Microsoft (NASDAQ:MSFT) surged on Friday following the announcement of its fiscal third-quarter earnings, which exceeded analysts’ projections on both revenue and earnings, fueled by the robust performance of its cloud computing segment.

“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” remarked Microsoft CEO Satya Nadella in a statement.

Microsoft revealed that its AI services contributed 7 percentage points of growth to its Azure and other cloud services revenue, up from 6 points in Q2 and 3 points in Q1. The company provided Q4 revenue guidance ranging between $63.5 billion and $64.5 billion, slightly ahead of analysts’ expectations of $64.7 billion.

During the earnings call, Microsoft CFO Amy Hood highlighted the surge in near-term AI demand outstripping available capacity.

Microsoft reported earnings per share of $2.94 on revenue of $61.9 billion, surpassing Wall Street estimates of $2.83 EPS on revenue of $60.88 billion. The commercial cloud revenue reached $35.1 billion, exceeding Wall Street’s forecast of $33.93 billion.

Segment-wise, Microsoft witnessed revenue beats in Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, driven by solid growth in Windows OEM sales and Xbox content and services.

The notable revenue increase in More Personal Computing was attributed to a 11% rise in Windows OEM sales and a remarkable 62% surge in Xbox content and services sales, with 61% stemming from Microsoft’s acquisition of Activision Blizzard.

While Microsoft’s shares have climbed 32% over the past 12 months, trailing behind Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN), the company continues to compete vigorously in offering comprehensive AI solutions to enterprise and consumer markets.

Microsoft’s AI endeavors received a significant boost with Coca-Cola (NYSE:KO) signing a five-year, $1.1 billion agreement to utilize Azure cloud services and AI technology.

“We have made significant progress to accelerate system-wide AI transformation across The Coca-Cola Company and its network of independent bottlers worldwide,” stated Microsoft executive vice president and chief commercial officer Judson Althoff.

Microsoft has intensified its AI efforts with notable hires, including Mustafa Suleyman, co-founder of DeepMind AI and Inflection AI, who now leads the Microsoft AI division. Additionally, the company announced a partnership with French AI startup Mistral to offer its models on the Azure platform.

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