Microsoft (MSFT) reported fiscal third-quarter earnings on Tuesday, beating Wall Street expectations, despite the company’s continued slowdown in cloud revenue.
The tech giant reported revenue growth of Azure and other cloud services of 27% year-over-year for the quarter. That number has been declining every quarter since at least the third quarter of 2022, as companies reduce capital expenditures due to rising interest rates.
Here are the report’s bigger numbers than analysts expected, compiled by Bloomberg.
Income: $52.9 billion versus $51.1 billion expected
adj. EPS: $2.45 versus $2.23 expected
Productivity and business processes: $17.5 billion versus $17.1 billion expected
Smart cloud: $22.1 billion versus $21.9 billion expected
More personal computers: $13.3 billion versus $12.3 billion expected
Shares of Microsoft are up more than 4% after the announcement.
“The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing,” Microsoft CEO Satya Nadella said in a statement.
“Across the Microsoft cloud, we’re the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”
Microsoft helped kickstart Big Tech’s AI obsession with its multi-year, multi-billion dollar investment in ChatGPT developer OpenAI.
The Windows maker has since rolled out versions of OpenAI technology in the Edge browser, Bing search engine, Microsoft 365 productivity software, and cybersecurity offerings.
This gave Microsoft a perceived leadership position in the AI wars, leaving Alphabet’s rival Google (GOOG, GOOGL) to catch up. Amazon (AMZN), meanwhile, is working to bring generative AI to its services, while Facebook parent Meta (META) is assembling teams to kickstart its efforts.
And while Microsoft’s shares have seemingly benefited from both the AI hype and the general market rebound after a difficult 2022, the company’s main growth driver continues to be its commitment to cloud computing in its Azure unit.
But that growth has slowed significantly over the past year. In the third quarter of 2022, Microsoft reported Azure growth of 46% year over year. But it has declined every quarter since then, falling to 27% in the third quarter of 2023.
Part of the reason for this decline was that large customers cut back on spending as higher interest rates took a toll on global growth. Microsoft is also grappling with declining PC sales as demand from consumers and business customers declines from pandemic-era highs.
The company reported a 9% decline in its More Personal Computing segment revenue, with Windows OEM revenue down 28%. Microsoft sells Windows and other software licenses to third-party PC partners.
From Daniel Howley, technical editor of Yahoo Finance. Follow him @DanielHowley
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