Microsoft’s Azure
cloud-computing business delivered another quarter of
blockbuster growth on Wednesday, powering revenue above Wall
Street’s expectations and showcasing the growing returns on its
massive artificial intelligence bets.
Shares of the software company rose 7% in extended trading
after it said Azure sales surpassed $75 billion on an annual
basis, the first time it has disclosed that figure, beating
expectations for $74.62 billion.
Microsoft’s results come after Google said it would spend more
on data centers to meet demand for AI services, and Meta
projected higher sales with only modest increases in spending.
The trio of results could help resolve investor questions about
whether Big Tech is benefiting from its massive data center
buildout, with capital spending to reach $330 billion this
year.
Microsoft’s cloud business still trails market leader Amazon
Web Services, which had a head start in cloud computing
and brought in $107.56 billion in its most recent fiscal year.
But investors said Microsoft’s new revenue figure indicates its
investments are translating to increased sales.
“Now that Microsoft’s disclosing that number, it’s really
just helping justify the huge investments,” said Dave Wagner,
portfolio manager at Aptus Capital Advisors, which holds
Microsoft shares.
Rival Alphabet’s earnings also showed last week
that AI spending was rising, but so were the returns, as it beat
revenue estimates and lifted its outlay forecast by $10 billion.
Microsoft said Azure revenue jumped 39% in the June quarter,
more than the average analyst estimate of 34.75%, according to
Visible Alpha.
Overall revenue rose 18% to $76.4 billion in the April-June
period, Microsoft’s fiscal fourth quarter. Analysts on average
expected $73.81 billion, according to data compiled by LSEG.
Capital spending rose 27% to $24.2 billion, compared with
estimates of $23.08 billion, per Visible Alpha. Microsoft has
said the spending is crucial to overcoming supply constraints
that have hampered its ability to meet soaring AI demand.
LONGER-LIVED ASSETS
Microsoft said its capital spending trended slightly toward
longer-lived assets such as data centers, after it previously
told investors the mix would shift toward shorter-lived assets
such as chips over its 2026 fiscal year. Jonathan Neilson,
Microsoft’s vice president of investor relations, said the
company is adjusting its plans based on six straight quarters of
growth in commercial bookings, the metric Microsoft uses to
track long-term contracts.
“We are going to absolutely invest against that,” Neilson
said in an interview.
The company has emerged as an early leader in making money
from AI thanks to its exclusive access to OpenAI’s technology.
The tie-up has helped attract scores of businesses to its cloud
service and allowed Microsoft to swiftly roll out AI products
such as its M365 Copilot AI assistant for enterprises.
“The bar was set really high. And my impression is they
delivered … They were able to execute in a very demanding
environment,” said Dan Morgan, portfolio manager at Synovus
Trust, which owns Microsoft shares.
Microsoft is just $200 billion short of becoming only the
second company to hit a $4-trillion valuation, with its shares
up about 20% this year.
But investor doubts have risen about the OpenAI tie-up as
the companies renegotiate the deal and the startup shifts some
workloads to rivals, including Google and Oracle.
Media reports have said the two are at a deadlock over how
much access Microsoft will retain to OpenAI’s tech and its stake
if OpenAI converts into a public-benefit corporation.
Microsoft has tried to reduce its reliance on OpenAI by
developing in-house AI technology and broadening its model
lineup with partners such as xAI, Meta, and France’s<\/p>\n","protected":false},"excerpt":{"rendered":"
Microsoft’s Azurecloud-computing business delivered another quarter ofblockbuster growth on Wednesday, powering revenue above WallStreet’s expectations and showcasing the growing returns on itsmassive artificial intelligence bets.Shares of the software company rose 7% in extended tradingafter it said Azure sales surpassed $75 billion on an annualbasis, the first time it has disclosed that figure, beatingexpectations for $74.62 […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-31886","post","type-post","status-publish","format-standard","hentry","category-news"],"yoast_head":"\n