Microsoft beats second-quarter earnings on cloud strength, and its shares are flat

Microsoft beats second-quarter earnings on cloud strength, and its shares are flat

Microsoft (MSFT) reported its second-quarter earnings on Tuesday, beating expectations at both top and bottom lines. The company reported adjusted earnings per share of $2.93 on revenue of $62 billion, beating adjusted EPS expectations of $2.78 on revenue of $61.1 billion.

The company’s shares fell 1% after the announcement.

Microsoft’s all-important cloud revenue was $33.7 billion, beating estimates of $32.2 billion. The company’s intelligent cloud business, which includes Azure, was $25.8 billion versus expectations of $25.3 billion. According to the company, AI services contributed 6 percentage points to Azure revenue growth, compared to 3 percentage points last quarter.

“We have moved from talking about artificial intelligence to implementing artificial intelligence at scale,” Microsoft CEO Satya Nadella said in a statement. “By infusing AI into every layer of our technology, we are winning new customers and helping realize new benefits and productivity gains in every sector.”

Microsoft has been one of the biggest beneficiaries of the AI ​​trade, with its shares jumping 50% over the past 12 months and Microsoft’s market cap exceeding $3 trillion.

As of Tuesday afternoon, Microsoft was the world’s richest company by market capitalization, ahead of longtime rival Apple (AAPL), which has been hurt by recent stock downgrades over concerns about slowing iPhone sales in China.

On the productivity side, Microsoft’s productivity and business operations revenue is expected to reach $19.25 billion, ahead of estimates of $19.03 billion. The company’s more personal computing business, which includes Windows software sales and its Xbox gaming division, generated $16.89 billion.

LAS VEGAS, NV - JANUARY 09: Satya Nadella, Chairman and CEO of Microsoft, speaks during a keynote speech by Walmart President and CEO Doug McMillon during CES 2024 at the Venetian Resort Las Vegas on January 9, 2024 in Las Vegas, Nevada.  CES, the world's largest annual consumer technology trade show, runs through January 12 and features about 4,000 exhibitors showcasing their latest products and services to more than 130,000 attendees.  (Photo by Ethan Miller/Getty Images)

Microsoft Chairman and CEO Satya Nadella during a press event at CES 2024. (Ethan Miller/Getty Images) (Ethan Miller via Getty Images)

Microsoft’s AI efforts permeate almost every part of its business, and making sure it delivers the desired results is something the company has a strong focus on. To date, it has monetized its AI efforts through generative AI cloud services, the Copilot productivity platform for Microsoft 365, and Copilot Pro for consumers.

Earlier this month, the company also opened up Microsoft 365’s Copilot program to all businesses, eliminating a prerequisite that required customers to have 300 or more employees to sign up for the paid service. Customers pay $30 per user per month to access the software. Meanwhile, Copilot Pro for consumers costs $20 per month per user and is intended for consumer customers who want to take advantage of Copilot’s more advanced features.

Microsoft, along with rivals Google (GOOG, GOOGL) and Amazon (AMZN), have poured billions of dollars into AI investments over the past year, as each seeks to gain the upper hand in the race to become the leading AI software company. .

Microsoft took an early lead thanks to its investment in ChatGPT developer OpenAI, but Google and Amazon are making progress. Google released its powerful Gemini AI model in December, and in September, Amazon announced a $4 billion investment in AI company Anthropic, giving the cloud giant a minority ownership stake in the company.

But the generative AI technology has come under fire recently, with users on X posting explicit AI-generated photos of Taylor Swift. The move sparked more calls for legislation targeting so-called fake photos and videos.

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However, this controversy is unlikely to slow down the AI ​​train. With companies pumping out technology-related product announcements at a steady pace, and PC and smartphone vendors debuting their own products capable of running generative AI software natively, it’s clear that generative AI will be a force throughout 2024.

Daniel Holley He is the technology editor at Yahoo Finance. He’s been covering the tech industry since 2011. You can follow him on Twitter @Daniel Holly.

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