Microsoft exceeded Wall Street estimates for third-quarter revenue and profit, driven by the widespread adoption of artificial intelligence (AI) across its cloud services. This success propelled Microsoft’s shares to jump more than 4% in extended trading, leading to a significant increase in the company’s stock market value.
Optimistic Forecasts for Current Quarter Cloud Revenue
Executives provided optimistic forecasts for current quarter cloud revenue, mostly surpassing Wall Street targets. The rise in Microsoft’s shares added $128 billion to its market capitalization, highlighting the market’s confidence in the company’s profit and revenue growth despite higher-than-expected capital expenditure.
Azure, Microsoft’s cloud computing platform, experienced a 31% increase in revenue, outpacing market expectations. This growth reflects the growing demand for cloud services powered by AI technologies.
Surpassing the Consensus Estimate
Microsoft’s revenue for the quarter reached $61.9 billion, surpassing the consensus estimate of $60.8 billion, with earnings per share of $2.94 exceeding Wall Street’s target.
However, Microsoft’s AI-driven capital expenditure in the third quarter was nearly $1 billion more than analysts’ estimates. The company invested heavily in scaling its available capacity to meet growing customer demand, driving its capital expenditure to $14 billion.
Microsoft’s Intelligent Cloud unit, which includes Azure, reported revenue of $26.7 billion, surpassing the average estimate. The company forecasted fourth-quarter Intelligent Cloud revenue to be between $28.4 billion and $28.7 billion, ahead of Wall Street targets.
Forecasting a Continued Growth Rate
Azure’s revenue growth of 31% exceeded market expectations, with Microsoft forecasting a continued growth rate of 30-31% in the fiscal fourth quarter. This growth is attributed to Microsoft’s strategic partnership with OpenAI and its investment in generative AI tools.
Overall, Microsoft’s strong performance in the third quarter, fueled by AI-driven innovation and robust demand for cloud services, reaffirms its position as a leader in the technology industry.
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