Microsoft reported strong quarterly earnings on Wednesday, surpassing analyst expectations despite a significant outage affecting its Azure cloud service and Office 365 suite. The tech giant posted earnings of $3.72 per share, above the $3.68 forecast, and revenue of $77.7bn, exceeding the $75.5bn estimate. This compares to $3.30 per share and $65.6bn revenue in the same quarter last year.
The outage, which impacted Azure Front Door and took down Xbox and investor relations pages, did not dampen the company's financial performance. Azure cloud revenue grew by approximately 40%, also beating expectations. Operating income rose 24% to $38bn, while net income reached $27.7bn. Microsoft's capital expenditure on AI-related projects surged 74% year-on-year to $34.9bn.
Chief Executive Satya Nadella highlighted the company's AI investments, stating, 'Our planet-scale cloud and AI factory, together with Copilots across high-value domains, is driving broad diffusion and real-world impact.' The earnings come a day after a revamped deal with OpenAI pushed Microsoft's valuation above $4tn, with the company now holding a 27% stake in the new OpenAI Group PBC.
Chief Financial Officer Amy Hood addressed investor concerns about an AI investment bubble, noting that the aggressive expansion in AI capacity—up 80% this year—is to meet already-booked demand. 'We need to continue to build out infrastructure... for booked business today,' she said, adding that the company has been short of processing capacity for several quarters and expects to remain so.
Microsoft's results kick off earnings season for the 'Magnificent Seven' tech giants, with Meta and Alphabet also reporting on Wednesday. The broader market has been buoyed by AI investments, though some investors worry about overvaluation. Hood's comments sought to reassure that spending is backed by strong demand signals and usage patterns.
