Microsoft reports $20.1 billion quarterly profit; promises to lead new AI platform shift
Microsoft on Tuesday (July 26) reported fiscal fourth-quarter profit of $20.1 billion, or $2.69 per share, beating analyst expectations for $2.55 per share.
It posted revenue of $56.2 billion in the April-June period, up 8 per cent from last year. According to FactSet Research, analysts had been looking for revenue of $55.49 billion.
Early mover in generative AI tools
CEO Satya Nadella said the company remains focused on leading the new AI platform shift.
Organisations are asking not only how but how fast they can apply this next generation of AI to address the biggest opportunities and challenges they face safely and responsibly, he said in a prepared statement.
Microsoft was an early mover in this year’s hype around generative AI tools that can help people write documents and create new images and other media. It capitalised on its multi-billion dollar investments in ChatGPT-maker OpenAI to launch a chatbot for Microsoft’s Bing search engine and similar tools tailored to its business customers.
Macquarie analyst Sarah Hindlian-Bowler said investors have been focused on Microsoft’s early revenue from those AI investments, the performance of the Azure cloud computing platform and the likelihood that Microsoft will close its deal to buy video game company Activision Blizzard, which could help boost gaming revenue and drive more users to the Xbox game system and other Microsoft platforms.
More than 18 months after announcing the $69 billion deal, Microsoft is still negotiating with a British anti-trust regulator over concerns it will harm competition. The US Federal Trade Commission also opposed the transaction but lost a court fight to stop it.
Also read: Tech giants Amazon, Google, Meta, Microsoft voluntarily agree to AI safeguards
We still expect a successful close as the company works toward an amenable solution that satisfies the UK’s concerns, Hindlian-Bowler said in an analyst note ahead of Tuesday’s earnings.
Microsoft doesn’t reveal the total revenue for its Azure business, though a document inadvertently disclosed during its recent court fight with the FTC showed it as $34 billion last year, Hindlian-Bowler said. Microsoft has declined to comment on that number.
Personal computing business
While AI has captivated the attention of the public and investors, Microsoft is also still heavily reliant on its personal computing business centered around the licensing fees paid by the makers of computers running its Windows software.
Also read: Microsoft, US regulators head to court over $69 billion deal that could reshape video gaming
Worldwide PC sales in the April-June quarter dropped 16.6 per cent from the same time last year, marking the seventh consecutive quarter of year-over-year decline, according to market research group Gartner. However, the market is starting to stabilise and demand could grow again in 2024, Gartner said.
Microsoft has laid off hundreds of workers in recent months, including many around its headquarters in Redmond, Washington, according to notices it sent to government agencies. That’s on top of the 10,000 employees, almost 5 per cent of its workforce, that it cut earlier this year.
(AP)
