Microsoft (MS) said on Tuesday that its third-quarter revenue and earnings beat Wall Street expectations, driven by growth in its cloud computing and office productivity software businesses. The announcement sent shares higher in after-hours trading.
Microsoft reported earnings per share of $2.45. Data from Refinitiv showed that it was above the Wall Street estimate of $2.23, up 10% from the same quarter last year.
Shares of Redmond, Washington-based Microsoft (NASDAQ:MSFT) rose 9.04% in after-hours trading on Tuesday following this third-quarter earnings report.
Microsoft’s revenue for the March-end quarter rose 7% to $52.9 billion, beating the average analyst estimate of $51.02 billion, according to Refinitiv. Most of Microsoft’s revenue still comes from selling software and cloud computing services to customers.
Microsoft made headlines this year for its partnership with ChatGPT creator OpenAI and augmenting its Bing search engine with artificial intelligence technology.
Microsoft said its cloud business Azure grew 27% in the latest quarter, beating the 26.6% consensus of 23 analysts surveyed by Visible Alpha.
Microsoft CEO Satya Nadella told investors on a conference call after the financial results announcement that the company has more than 2,500 Azure-OpenAI service customers and outlined AI-powered capabilities in various products.
Nadella said that Bing, which also served as Google’s search engine for a long time, has 100 million daily active users, and downloads have skyrocketed since AI features were added.
Microsoft expects revenue from its Intelligent Cloud segment to be between $23.6 billion and $23.9 billion for the current quarter, the fiscal fourth quarter. According to Refinitiv, Wall Street’s average target is $23.8 billion.
Analysts expected a gloomy economic outlook to hurt Microsoft’s Windows business, which relies heavily on sluggish PC sales in recent quarters. However, Microsoft’s revenue in this segment was less severe than analysts expected, with revenue of $13.3 billion, beating analysts’ expectations of $12.19 billion.
The company’s productivity segment, which includes sales of Office software and advertising on the LinkedIn social networking site, posted revenue of $17.5 billion, beating analyst expectations of $16.99 billion.
Total revenue for Microsoft’s cloud division, which includes Azure and other services, came in at $22.1 billion, slightly above expectations of $21.85 billion.
Big cloud giant Alphabet (NASDAQ:GOOGL) also posted better-than-expected earnings on Tuesday, with shares rising 1.31 per cent in after-hours trading. As a result of Alphabet and Microsoft’s efforts, shares of Amazon.com (NASDAQ:AMZN), another major cloud operator, rose 4.85% in after-hours trading on Tuesday.