Sales from July through September hit $65.6 billion, up 16% from a year earlier. Profit rose 11%, to $24.7 billion. The results surpassed Wall Street’s expectations and Microsoft’s own predictions.
At the same time, Microsoft showed little sign that it was putting the brakes on the blistering pace of its spending to build data centers for its AI work. The company spent $20 billion on capital expenditures, up 79% from a year earlier.
“We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools,” Satya Nadella, Microsoft’s CEO, said in a statement.
The company’s executives had told investors that Microsoft expected sales to be constrained through the end of the year because its available data center capacity was not enough to meet customer demand.
The company has bet heavily on artificial intelligence through its investments in the startup OpenAI. That relationship has given it “an enviable position as the vanguard of the new technology,” and Microsoft is gaining share from competitors, analysts for Raymond James wrote in a note to investors.
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Since the summer of 2023, AI has helped stabilize the growth of Microsoft’s flagship cloud computing service, Azure. This past quarter, Azure’s growth held roughly steady at 34%, not including currency fluctuations. More than a third of that growth came from artificial intelligence, including selling access to OpenAI’s systems and providing computing power when customers use OpenAI’s directly from the startup. (The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to AI systems. The two companies have denied the suit’s claims.)
Investors were somewhat unsure about what to expect for the quarter, because in August, Microsoft said it was tweaking which products were included in certain metrics it reported. Microsoft’s share price rose about 1.5% in after-hours trading Wednesday.
Investors have been jittery about Microsoft’s capital spending because they have “limited visibility” into whether and how the spending produces solid returns on the investments, analysts from Bank of America wrote in a recent note.
The company does not disclose sales of its own AI assistants, which cost business customers $30 per month, but its overall Microsoft 365 commercial cloud revenue, which includes Excel, Team and Word, was up 15%.
