Microsoft Earnings Hit High Note, Led By Azure, Intelligent Cloud

Investors are loving Tuesday’s Microsoft earnings report.

The software giant on Tuesday released its latest quarterly financials, and revenue and earnings per share came in higher than analysts and other observers had anticipated.

To the first point, sales reached $56.5 billion, a 13% increase over the same period a year ago and higher than analysts’ predictions of $54.5 billion. It’s also marginally higher than the $56.2 billion in revenue Redmond posted for its fiscal fourth-quarter 2023, which ended June 30. Meanwhile, earnings per share came to $2.99; analysts had forecast $2.66.

The Intelligent Cloud division, which houses the Azure business, led the way for Microsoft earnings. That segment raked in $24.3 billion in revenue, above Wall Street’s hopes for $23.6 billion. Importantly, sales from Azure alone grew 29%. Microsoft still does not disclose Azure’s earnings in dollars, but Wall Street was looking for a smaller growth-rate percentage of 26%.

Finally, profit was $22.3 billion, a 27% rise propelled by lower operating expenses.

Microsoft's Amy Hood

“Consistent execution by our sales teams and partners drove a strong start to the fiscal year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Microsoft Earnings Rely on More Than Cloud Revenue

Other business units soared, too, not just cloud. The Productivity and Business Processes group, for example, reported almost $18.6 billion in revenue. That came in 13% above analysts’ consensus. The Productivity and Business Processes division includes Office commercial and consumer 365 subscriptions, LinkedIn and Dynamics enterprise software.

On the consumer side, the More Personal Computing segment – comprising Windows, Xbox, Bing and Surface – delivered $13.7 billion in revenue tin the latest round of Microsoft earnings. That was 3% higher than the same quarter a year earlier and more than the $12.9 billion experts projected.

Even so, devices revenue continued its decline, dropping 22%. However, multiple reports indicate that the PC market is regaining strength. Microsoft, for its part, did show 4% growth in sales of Windows OS licenses.

What About AI?

Throughout the latest Microsoft earnings, AI remains the hot technology du jour. While the company didn’t play up its AI lead too much prior to its conference call with analysts, Satya Nadella, chairman and CEO of Microsoft, did allude to ongoing successes.

"With copilots, we are making the age of AI real for people and businesses everywhere," Nadella said. "We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.”

Copilots, as a reminder, cost an additional $30 per month alongside a 365 subscription. The AI-powered technology summarizes a day of emails.

In other developments tied to quarterly Microsoft earnings, the company said it has returned $9.1 billion to shareholders in the form of share repurchases and dividends.

Shares of Microsoft had moved nearly 4% higher in after-hours trading on Oct. 24. The company’s market cap now sits at $2.46 trillion. That is down somewhat from its $2.6 trillion market cap on July 25, but still ranks second only to rival Apple.