Microsoft’s cloud computing business had a surprisingly strong quarter despite pressure from a slowing US economy, the company said Tuesday.
In the first three months of the year, revenue increased 7% year-over-year to $52.9 billion and profit increased 9% to $18.3 billion. Both beat Wall Street expectations.
Microsoft’s cloud business (which includes Azure, cloud computing products, and the Microsoft 365 platform) had revenue of $28.5 billion, up 22% year-over-year.
Azure revenue, a key result that investors have been watching, was up 27%, in line with investor expectations. That’s still down from the 46% increase in the previous year. Overall, the segment the company calls Intelligent Cloud grew 16% year-over-year, beating expectations.
Microsoft’s cloud offerings “will definitely be a very important engine for us going forward,” said James Ambrose, director of investor relations at Microsoft.
Microsoft shares are up more than 8% in after-hours trading.
Microsoft, like many other tech companies, has been hampered by a sluggish economy after massive growth during the pandemic. The company announced in January that it would lay off 10,000 employees.
The company’s Windows business is sluggish as the global market for PC sales slows. His most recent quarter’s revenue from Microsoft’s personal computing segment was $13.3 billion, down 9% from the same period last year. Within that category, revenue from Windows OEM (the first installation of Windows software on a new computer) decreased 28% and device revenue decreased 30%.
Revenue from the video games segment, Microsoft’s most important consumer business, fell 4% year-over-year as Xbox hardware sales fell 30%.
Still, Microsoft’s stock price remains strong, in part due to the company’s forays into the burgeoning artificial intelligence space.
Ambrose cautioned that strong numbers do not necessarily indicate an improving macroeconomic environment. “I don’t know if it indicates a big shift in how we look at the economy,” he said.
Microsoft’s chief financial officer Amy Hood said on a conference call with investors that this quarter’s revenue growth could be flat compared to a very strong quarter a year ago. said.
Microsoft is also poised to benefit from the AI boom through its investment in OpenAI, the startup behind the ChatGPT chatbot. He has already integrated ChatGPT into the Bing search engine and says he will bring AI to his other Microsoft products as well.
The company said it was too early for future technology to impact its quarterly financial numbers, but chief executive Satya Nadella introduced himself in a 15-minute conference call with investors. said “AI” or “OpenAI” at least 24 times.
“We have the most powerful AI infrastructure,” Nadella said at one point, noting that various companies are already using Microsoft’s AI tools in their businesses. The company said it would spend to expand its infrastructure to support high demand for its AI products.
