Microsoft Corp beat Wall Street’s quarterly revenue and profit estimates on Tuesday, driven by growth in its cloud computing and Office productivity software businesses, and the company said artificial intelligence products were stimulating sales.
The company forecast that revenue in its main segments for the current quarter would match or top Wall Street targets.
Shares gained 8.3% in after-market trading following a report by the Redmond, Washington-based technology company that profits were $2.45 a share in the fiscal third quarter, beating Wall Street estimates of $2.23, according to data from Refinitiv and up 10% from the same quarter last year.
In regular trading, fears about earnings had sent Microsoft down 2.2%, making it the biggest drag on the S&P 500 on Tuesday ahead of its report.
Revenue rose 7% to $52.9bn in the quarter ended March, inching past the average analyst estimate of $51.02bn, according to Refinitiv. The bulk of Microsoft sales still come from selling software and cloud computing services to customers.
But the company has grabbed headlines this year with its partnership with ChatGPT creator OpenAI and sprucing up the Bing search engine with artificial intelligence technology.
Microsoft said growth at its cloud business Azure was 27% in the latest reported quarter, beating analyst expectations for 26.6% growth, according to the consensus from 23 analysts polled by Visible Alpha.
Chief executive Satya Nadella told investors on a conference call that the company had more than 2,500 Azure-OpenAI service customers and AI-powered features in a wide array of products.
Bing, long an also-ran to search engine Google, has 100 million daily users and has seen downloads jump since the addition of AI features, Nadella said.
Microsoft forecast revenue in the intelligent cloud unit for the current quarter, the fiscal fourth, of $23.6-$23.9bn compared with Wall Street’s average target of $23.8bn, according to Refinitiv.
It saw revenue in the More Personal Computing segment of $13.35-$13.75bn, which would top Wall Street’s estimate of $13.2bn. The productivity and business processes unit, which includes Office, was seen producing revenue of $17.9-$18.2bn, which would beat the analysts’ average target of $17.8bn.
Analysts had expected a gloomy economic outlook to hit Microsoft’s Windows business, which depends heavily on PC sales that have sagged in recent quarters. The sales drop in the segment was less severe than analysts expected, with Microsoft reporting revenue of $13.3bn versus analyst estimates of $12.19bn, according to Refinitiv data.
The company’s productivity segment, which includes its Office software and advertising sales for the LinkedIn social networking site, also beat analyst expectations with revenue of $17.5bn versus estimates of $16.99bn, according to Refinitiv.
Overall revenue for the company’s cloud unit, which includes Azure as well as other services, was $22.1bn, slightly above estimates of $21.85bn, according to Refinitiv data.
Alphabet Inc, which also has a large cloud business, reported strong results on Tuesday, lifting its shares 2.4% after the bell. Those results and Microsoft’s helped boost shares of Amazon.com Inc, another major cloud operator, 4.8% in after-hours trading.