Microsoft shares are little changed in late trading Tuesday after the software giant posted December quarter results that edged Wall Street estimates. The results suggest continued progress in the company’s big AI push.
For the fiscal third quarter ended Dec. 31 the company reported revenue of $62 billion, about $1 billion ahead of Street estimates. Profits in the quarter were $2.93 a share, ahead of the analyst consensus forecast of $2.76 a share.
Microsoft reported better-than-expected revenue in all three of its business segments. Azure and other cloud revenue was up 30%, or 28% adjusted for currency. The company said AI related services contributed six percentage points of growth to Azure growth in the quarter, a clear demonstration that the company’s AI business is gaining traction.
“We’ve moved from talking about AI to applying AI at scale,” CEO Satya Nadella said in a statement. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”
Revenue in the the company’s intelligent cloud segment was $25.9 billion, up 20%, or 19% in constant currency, ahead of the Street consensus as tracked by FactSet of $25.3 billion.
For the Productivity and Business Processes segment, which includes Office, revenue was $19.2 billion, up 13%, or 12% on a currency adjusted basis, ahead of consensus at $18.7 billion.
For More Personal Computing, which including Surface hardware and the company’s gaming business, revenue was $16.9 billion, up 19%, or 18% adjusted for currency, edging consensus at $16.8 billion. That segment includes the company’s recent acquisition of Activision. Microsoft noted that costs related to the acquisition reduced income by 44 cents a share in the quarter.
The company said Microsoft Cloud, which includes Azure and other cloud related businesses, had revenue of $33.7 billion in the quarter, up 24%, or 22% adjusted for currency.
Gross margin in the quarter was 68%, up one percentage point from the year-ago quarter. Operating margin was 44%, up five points.
Microsoft said capital spending in the quarter was $11.5 billion, increasing from $11.2 billion in the September quarter, and up 68% from a year ago, reflecting higher spending tied to the cloud and AI workloads.
The company said commercial bookings were up 17% as reported, or 9% in constant currency.
The company didn’t provide numbers on the early progress of its Microsoft 365 copilot software, but it did point out that the company crossed the 400 million user mark for the Commercial versions of 365.
Microsoft bought back $2.8 billion of stock during the quarter.
Ahead of the company’s earnings call, the stock is off about 2%.
