Microsoft sales top estimates; The rise of clouds frustrates some people

(Bloomberg) — Microsoft Corp. reported its strongest revenue growth since 2022, driven by interest in new artificial intelligence products, which in turn is driving renewed spending on cloud computing.

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Revenue rose 18% to $62 billion in the second quarter ended Dec. 31, while profit was $2.93 a share, the company said in a statement Tuesday. Analysts polled by Bloomberg had on average forecast per-share earnings of $2.78 on sales of $61.1 billion.

Azure cloud-services sales grew 30% compared to 29% growth in the previous quarter. This is more than the 28% growth expected by analysts. In a call with analysts, the company said growth in the Azure division “will remain stable” during the current quarter.

Investors have bid up shares in recent months on the bet that Chief Executive Officer Satya Nadella will turn Microsoft into an artificial intelligence powerhouse by partnering with startup OpenAI. Microsoft’s optimism about AI prospects has pushed its market capitalization above $3 trillion, making Apple Inc. the world’s most valuable company.

And there are signs that efforts to incorporate AI into a variety of major products, including Azure, Office, and Windows, are starting to pay off. But some investors were clearly expecting more, and shares fell a few percentage points in late trading before recouping some of their losses.

“Microsoft had a lot to live up to this quarter,” Hargreaves Lansdown analyst Sophie Lund-Yates wrote in a note to clients. “The company delivered good results, but not enough to please the market,” he added.

In an interview, Chief Financial Officer Amy Hood said AI has driven Azure’s growth rate by six percentage points. Going forward, he said, interest in AI products…

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