Shares of Microsoft (NASDAQ:MSFT) jumped sharply in premarket trading Thursday following the release of quarterly results that outperformed Wall Street forecasts, propelled by strong momentum in its flagship cloud service enhanced by artificial intelligence.
The cloud division, known as Azure, saw fiscal fourth-quarter revenue rise 39% compared to the same period last year, exceeding analyst predictions and driving total company sales to $76.4 billion.
Net profit stood at $27.2 billion, or $3.65 per diluted share, also beating estimates.
Highlighting the full fiscal year, CEO Satya Nadella noted that Azure generated more than $75 billion in revenue, with an annual growth rate of 34%. Nadella attributed this expansion to “demand across every industry and sector” as businesses increasingly embrace AI-powered solutions.
Wedbush analyst Daniel Ives commented, “This was a slam-dunk quarter for Microsoft with cloud and AI driving significant business transformation,” and added the company is entering “a new phase of monetization on the AI front.”
In discussions with analysts, Microsoft executives indicated that, like other major tech giants, the company plans to ramp up spending on AI to quickly expand the data centers that support these technologies. CFO Amy Hood revealed a forecast for capital expenditures exceeding $30 billion in the upcoming quarter, following a 27% year-over-year increase to $24.2 billion in the previous quarter.
BofA Securities analysts noted that although the full-year capex forecast is higher than their expectations, it is justified by “solid demand signals.”
The brokerage added, “[The] fourth-quarter results validate our view that Microsoft is an AI beneficiary in both applications and infrastructure,” and with the AI software market estimated at $155 billion, “this sets up Microsoft for durable mid/high teens topline growth for years to come.”
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