Microsoft (MSFT) announced its first quarter earnings late Wednesday, exceeding analysts’ expectations on both revenue and earnings per share, largely driven by the strong performance of its cloud division. The company reported a commercial cloud revenue of $49.1 billion for the quarter, surpassing the projected $48.6 billion.
However, despite the encouraging financial results, Microsoft’s shares dipped by over 2%. This downturn occurred amidst a backdrop of interruptions in Azure services, which recently experienced an outage that affected businesses worldwide. This incident is notable as it comes just a week after Amazon’s AWS grappled with a similar outage.
For the fiscal quarter, Microsoft reported earnings per share (EPS) of $3.72 on revenues of $77.7 billion, compared to analysts’ forecasts of an EPS of $3.68 on revenue of $75.5 billion, as indicated by Bloomberg consensus estimates. This performance marks an increase from last year’s EPS of $3.30 and revenue of $65.6 billion during the same period.
In terms of specific segments, Microsoft’s Intelligent Cloud revenue, which includes Azure sales, reached $30.9 billion, also exceeding Wall Street’s expectations of $30.2 billion.
Simultaneously, Microsoft revealed a revised agreement with OpenAI that will facilitate new operational structures, allowing the ChatGPT developer to transition into a for-profit public benefit corporation while still being supported by its nonprofit arm. As part of this deal, Microsoft will hold a 27% share of the OpenAI Group PBC, which is valued at approximately $135 billion, while OpenAI’s nonprofit arm will own a $130 billion stake in the for-profit entity.
Over the years, Microsoft has invested heavily in OpenAI, leveraging its resources to enhance software capabilities available to users on the Azure platform, consequently bolstering Microsoft’s revenue streams. Initially, Microsoft served as the sole cloud provider for OpenAI, but under the new arrangement, OpenAI will be able to explore partnerships with other cloud services, such as Oracle, while still committing to a substantial $250 billion expenditure on Azure.
In addition to its cloud initiatives, Microsoft is also pushing forward with its AI offerings across various consumer products. Earlier this year, it introduced Copilot for PCs, and recent updates to Windows 11 now allow users to interact with the Copilot AI chatbot through voice commands. Furthermore, Copilot is being integrated into Microsoft’s Xbox gaming applications, marking a broader expansion of AI functionalities across its platforms.
These developments signal Microsoft’s ongoing commitment to enhancing its cloud and AI capabilities, positioning it favorably in the ever-evolving tech landscape.