Microsoft’s sales and profits exceed expectations – AI demand is a tailwind – Bloomberg

Microsoft announced its January-March (third quarter) financial results on the 25th, showing that sales and profits grew faster than market expectations. This was supported by corporate demand for cloud and artificial intelligence (AI) products.

According to presentation materials, sales for the January-March period increased 17% to $61.9 billion (approximately 9.63 trillion yen), and earnings per share were $2.94.Analyst The average estimate was for sales of $60.9 billion and earnings of $2.83 per share.

CEO Satya Nadella is working to integrate technology from partner OpenAI into all of Microsoft’s product lines. Some customers have added AI tools for document summarization and new content generation to their business software “Office,” and some customers have moved to subscribe to the cloud service “Azure” with open AI products, and these efforts are beginning to bear fruit. There is.

Dan Morgan, senior portfolio manager at Synovus Trust, said of Microsoft: “Generative AI sales are already driving the stock price. Microsoft appears to be well positioned for success.” .

Azure’s sales increased 31% from January to March. The growth rate exceeded the average market estimate of 29%, and was slightly up from 30% in the previous period. AI accounted for approximately 7% of the sales increase, up from 6% in the previous quarter.

According to the company, Azure’s growth rate for the April-June (4th quarter) is expected to be 30-31%. That beat Bloomberg analysts’ expectations of 29%. Next fiscal year’s sales and operating income are expected to increase by over 10%.

Sales of commercial cloud products rose 23% to $35.1 billion in the first three months. Commercial bookings, an indicator of future sales, rose 29%, “well above what we expected,” Chief Financial Officer Amy Hood said in an interview.

Microsoft’s stock price briefly rose about 5% in after-hours trading after the close of regular trading.

The company is investing heavily in expanding its global network of data centers to meet growing demand for AI services, with capital spending reaching $14 billion in the January-March period. “The demand for AI continues to expand, and we will continue to work to match that demand,” Hood said.

On a conference call with analysts, Hood expected capital spending to increase “significantly” from $14 billion in the first three months. He also predicted that next year’s capital investment will be higher than the previous year.

Original title: Microsoft Sales, Profit Beat Expectations on AI Demand (3) (excerpt)

(We will add and update comments from market participants and CFOs from the 4th paragraph onwards.)