Microsoft reported record revenue and profit on Tuesday as it shrugged off recession fears and began to benefit from investments in generative artificial intelligence.
The company posted $56.2 billion in sales in the three months to June, up 8% from a year earlier. Profits rose 20% to $20.1 billion. The results beat analyst expectations and Microsoft’s own expectations.
Earnings surpassed Microsoft’s December 2021 record of $18.8 billion, even as capital spending rose to $10.7 billion, including costs such as building data centers and purchasing expensive chips needed to develop cutting-edge AI.
Investors have rallyed behind Microsoft in recent months as the company announced generative AI features across its products, including integrating chatbots into its Bing search engine and adding AI assistants to software used in offices around the world.
“Organizations are asking how and how quickly this next-generation AI can be applied to safely and responsibly address the biggest opportunities and challenges they face,” said Satya Nadella, the company’s CEO, in a statement.
The company last week announced pricing for Microsoft 365 Copilot, an AI-powered assistant for popular productivity software like Word, Excel, and PowerPoint. The price of $30 per user per month beat analyst expectations and pushed Microsoft’s market capitalization past $2.6 trillion for the first time.
Azure, Microsoft’s flagship cloud-computing product, saw sales rise 27% in the quarter, excluding foreign currency fluctuations, at the high end of the range the company told investors to expect. Bank of America analysts told investors last week that Azure is gaining market share because tech executives at companies Microsoft serves see the platform as a “cutting-edge AI product.”
The biggest drag on Microsoft’s business is declining sales of personal computers (often with Microsoft’s Windows operating system installed) as it pulls back from the surge in purchases by consumers and businesses to work and study from home in the midst of the pandemic. Microsoft’s personal computing business unit sales fell 4 percent to $13.9 billion.