Microsoft reported a significant 20 per cent increase in quarterly profits, which has bolstered its position in the competition against rivals like Google, Amazon, and Meta (parent company of Facebook) in the field of selling the latest artificial intelligence technology.
The software giant’s fiscal fourth-quarter profit reached $20.1 billion, equivalent to $2.69 per share, surpassing the analysts’ expectations of $2.55 per share. Moreover, it achieved a revenue of $56.2 billion in the April-June period, marking an 8 per cent increase compared to the previous year and exceeding the forecasted revenue of $55.49 billion.
Despite the positive financial results, Microsoft’s CEO, Satya Nadella, acknowledged that the AI features added to their existing products, such as cloud computing services, workplace software, and Bing search engine, have not yet had a significant impact on their financial outcomes.
However, the company has been actively investing in generative AI tools, capitalizing on its investments in OpenAI, the creator of ChatGPT, to launch a Bing chatbot and other AI tools tailored to business customers. Microsoft is also planning to charge $30 per user for its new AI “Copilot,” which integrates with software like Word, Excel, and email.
The company’s stock experienced a slight drop in after-hours trading despite beating Wall Street’s expectations for profit and revenue. Investors have been closely monitoring Microsoft’s early revenue from AI investments, the performance of its Azure cloud computing platform, and the potential closure of its deal to acquire video game company Activision Blizzard, which could drive more users to Xbox game systems and other Microsoft platforms.
Microsoft’s cloud business segment, with a 15 per cent growth, was the highest-earning in the quarter, generating $24 billion in sales. The flagship Azure platform, along with other cloud services, contributed significantly to this growth.
The company’s productivity software business, led by its Office suite, saw a 10 per cent increase in sales, reaching $18.3 billion for the April-June quarter.
Although AI has captured the attention of the public and investors, Microsoft’s personal computing business, centred around licensing fees for Windows software, remains a crucial revenue stream. This segment earned $13.9 billion in the quarter, down 4 per cent from the previous year, partly due to a decline in PC shipments. However, Gartner suggests that the PC market may stabilize and see growth again in 2024.
While Microsoft’s business-oriented approach has provided some insulation from economic challenges, the company has still undergone workforce reductions, including layoffs of hundreds of workers near its headquarters in Redmond, Washington. Earlier this year, Microsoft cut around 10,000 employees, amounting to almost 5 per cent of its workforce.
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