Microsoft shares fell on Tuesday after the tech giant reported quarterly profit rose, but its critical cloud computing unit missed expectations.
Microsoft said it made a profit of $22 billion on revenue of $64.7 billion in the recently ended quarter, up from the same period a year earlier.
Cloud unit revenue of $36.8 billion, however, disappointed investors and shares fell more than five percent to $401.06 in after-market trading.
Money brought in by cloud computing led to blockbuster profits quarter after quarter, and a hint that stellar growth might be slowing was enough to give investors pause.
Microsoft is among the big contenders in the tough race to build artificial intelligence systems, pouring billions of dollars into the technology in the hope it will pay off.
Microsoft is among the best-suited to monetize AI, having moved faster to implement it across all of its products and pouring $13 billion into OpenAI, the dynamic start-up behind ChatGPT.
Oil giant BP reports a fall in first-half profits
Winning the big bet on artificial intelligence is “critical” for the group, said Jeremy Goldman of Emarketer, “but the market is willing to give them a level of patience.”
The artificial intelligence frenzy has helped Microsoft’s cloud computing business grow by double digits, which analysts said could be difficult to sustain.
“This type of growth can’t last forever, but the synergies between cloud and AI make it more likely that Microsoft maintains reliable cloud growth for some time to come,” Goldman said.
Revenue from Microsoft’s AI-driven “Intelligent Cloud” unit was $28.5 billion, up 19 percent from the same quarter a year earlier, according to earnings data.
Microsoft’s “Azure” led to strong revenue growth from server products and cloud services, the company said.
“We closed out our fiscal year with a solid quarter, highlighted by record bookings and quarterly Microsoft Cloud revenue,” Chief Financial Officer Amy Hood said in an earnings release.
Profits fall at McDonald’s as it doubles down on value push
Microsoft CEO Satya Nadella added that the company “is focused on meeting the mission-critical needs of our customers across all our platforms today, while ensuring we lead the AI era.”
Microsoft reported net income of $88.1 billion for the fiscal year on revenue of $245.1 billion, up 22 percent and 16 percent respectively.
Money taken in by Microsoft’s Xbox video game unit rose 61%, boosted by its acquisition of Activision, according to earnings data.
Microsoft said the cost of attracting visitors to its search and news services rose 19% as it boosted services with artificial intelligence to better compete with Google.
Source: AFP