Microsoft Q3 2024 Earnings

Microsoft Q3 2024 Earnings

Microsoft Soars 5% Driven by AI and Cloud Business

Microsoft for Q3 2024 reported revenue of  $61.9 billion marking an increase of 17% year over year. The surge in revenue could be attributed to Microsoft's suite of AI systems, which are provided through its cloud computing platform Azure.


On a segmental basis, in the third fiscal quarter, Microsoft's Intelligent Cloud division, encompassing Azure public cloud, Windows Server, Nuance, and GitHub, brought in revenue of $26.71 billion, marking a significant 21% increase from the previous period.


Revenue from Azure and other cloud services grew by 31%, showing a slight acceleration from the 30% growth seen in the preceding quarter. Within the Azure growth, 7% points were attributed to AI, marking an increase from the 6 points observed in the previous quarter. Microsoft offers cloud services for OpenAI's ChatGPT chatbot, and businesses are increasingly embracing Azure AI services to enhance their abilities in tasks like information summarization and document writing. The capacity bottleneck impacted the AI segment of Azure's growth, as mentioned by CFO Amy Hood.


The Productivity and Business Processes division, which includes Office productivity software, LinkedIn, and Dynamics customer relationship management software, saw revenue of $19.57 billion, reflecting a rise of approximately 12%.


Microsoft's Intelligent Cloud segment, comprising the Azure public cloud, Windows Server, Nuance, and GitHub, yielded revenue of $26.71 billion marking a 21% growth YoY.


Microsoft’s Personal Computing segment encompassing the Windows operating system, Surface PCs, video games, and search reported a total revenue of $15.58 billion, showcasing an approximate 18% increase. Moreover, Revenue from Xbox content and services surged by 62%, attributed to the impact of the $75 billion acquisition in October of game publisher Activision Blizzard, which includes its renowned Call of Duty titles.


Furthermore, Microsoft's offerings encompass Copilot and Copilot stack, tools designed for creating images and documents introduced in November at a subscription price of $30 per month, which has contributed to the growth of Microsoft's enterprise software and Windows businesses. Additionally, a rebound in personal computer sales has also played a role in this growth.


According to Microsoft's Nadella, "Copilot and Copilot stack are orchestrating a new era of AI transformation," emphasizing that they are "driving better business outcomes across every role and industry." Microsoft's AI products rely heavily on its multi-billion-dollar investments with companies such as OpenAI, and more recently, Coca-Cola.


During the quarter, Microsoft rolled out Surface PCs equipped with a dedicated key for streamlined access to the Copilot chatbot. Additionally, the company began offering access to Copilot for small businesses through Microsoft 365 productivity software subscriptions. Moreover, Microsoft made a significant hire by appointing Mustafa Suleyman, co-founder of the artificial intelligence lab DeepMind, to lead a new AI group within Microsoft. Suleyman, previously the co-founder and CEO of startup Inflection, brought along several of its employees who also joined Microsoft.


Microsoft's AI aspirations received a significant boost on 23rd April with the announcement that Coca-Cola (KO) has entered into a five-year, $1.1 billion agreement to utilize the software giant's Azure cloud services and AI technology.


In terms of guidance, Microsoft's finance chief, Amy Hood, has projected $64 billion in revenue for the fiscal fourth quarter. Hood's forecast indicates an operating margin of 42.3%.


Microsoft shares surged as much as 5% in after-hours trading on 25th April following the release of the software maker's fiscal third-quarter results.


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