Cloud Growth Powers Microsoft Above Expectations

Microsoft on Tuesday reported strong sales in its latest quarter, showing that its corporate customers have been shaking off jitters about spending heavily in the uncertain economy.

The results also showed early signs that the company’s investments in generative artificial intelligence were beginning to bolster sales, most notably reversing what had been slowing growth of the company’s important cloud computing product.

The company had $56.5 billion in sales in the three months that ended in September, up 13 percent from a year earlier. Profit hit $22.3 billion, up 27 percent. The results beat analyst expectations and Microsoft’s own estimates.

Microsoft had told investors that A.I. wouldn’t start producing meaningful results until after the start of 2024, when more products become widely available. The company and its competitors are racing to put generative A.I. into nearly every product they offer. Microsoft is seen by many companies as a leading A.I. provider, thanks to its partnership with — and $13 billion investment in — the start-up OpenAI, which introduced the chatbot ChatGPT almost a year ago.

Microsoft’s flagship cloud computing product, Azure, grew 29 percent, up from 26 percent in the previous quarter. Microsoft told investors to expect about two percentage points of Azure’s growth to come from generative A.I. products, including access Microsoft provides to OpenAI’s GPT-4 language model.

Investors sent Microsoft’s share price up about 4 percent in after-hours trading.

The companies and other organizations that use cloud computing had become more conservative about their spending over the past year, as they looked to optimize their costs in the uncertain economy. So even as Microsoft and its competitors have raced head first into the new generation of A.I., they have been facing tight customer budgets.

Sales from Microsoft’s commercial subscriptions to its productivity suite, including Excel, Word and Teams, accelerated, growing 18 percent in the quarter. The integration of Microsoft’s generative A.I. “Copilot” into these products will start becoming widely available to commercial customers next month, which the investment bank UBS called “easily the most anticipated GenAI-based software application launch.”

“With copilots, we are making the age of A.I. real for people and businesses everywhere,” Satya Nadella, the company’s chief executive, said in a statement.

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