Microsoft exceeded Wall Street estimates for second-quarter revenue, driven by the appeal of new AI features in its cloud and Windows services. Despite this positive performance, Microsoft shares experienced a 1% dip in after-hours trading, following a significant 57% climb throughout the previous year. The company, along with other tech stocks like Alphabet and Nvidia, contributed to the S&P 500’s impressive 24% surge in 2023.
For the quarter ending on December 31, Microsoft reported a revenue growth of 18%, reaching $62 billion, surpassing the average analyst estimate of $61.12 billion, as per LSEG data. The Intelligent Cloud unit, housing the Azure cloud computing platform, demonstrated a robust performance with a 20% revenue increase to $25.9 billion. Azure sales, a key focus for investors, outpaced estimates with a growth rate of 30%, compared to the anticipated 27.7% consensus.
Investors are closely monitoring Microsoft’s Azure and Office revenues to gauge the sales impact resulting from the substantial investment of tens of billions of dollars into data centers. This investment aims to support the delivery of generative AI, reflecting Microsoft’s commitment to advancing AI technologies.
Despite a power struggle within OpenAI, Microsoft’s strategic partner, and some legal and regulatory challenges, the company’s shares have seen significant growth this year. The surge has elevated Microsoft’s market value, briefly surpassing its competitor Apple as the world’s most valuable listed company earlier in the month. Investors have responded positively to Microsoft’s emphasis on AI and its collaboration with OpenAI, the creators of ChatGPT.
In November, Microsoft introduced Copilot, an AI assistant available at a premium price of $30 per month. Early sales of Copilot influenced the commercial sales of Microsoft’s Office software, contributing to a 17% revenue growth. This exceeded analyst expectations, which anticipated a 14.2% growth in commercial Office sales, according to data from Visible Alpha. Microsoft, however, does not disclose an absolute dollar figure for these sales.