(Reuters) – Microsoft Inc beat Wall Street estimates for quarterly revenue and profit on Tuesday, driven by growth in its cloud computing and office productivity software business, and the company said artificial intelligence products were driving sales.
The company expects revenue in its key segments for the current quarter to match or beat Wall Street’s targets.
Shares rose 8.3% in aftermarket trading after a report from Washington-based Redmond reported that earnings were $2.45 per share in the fiscal third quarter, beating Wall Street’s estimate of $2.23, according to Refinitiv data.
“The bottom line is that despite all the fears that big technology is going backwards, the reality is that companies still see value in cloud computing and there is still a large percentage of workloads that can be moved to the cloud,” said Bob Donnell, TECHnalysis Research Analyst .
Microsoft said growth in its Azure cloud business was 27% in the most recent reported quarter, beating analyst expectations for 26.6% growth, according to a consensus of 23 analysts polled by Visible Alpha.
Alphabet Inc (GOOGL.O), which also owns a large cloud business, reported strong results Tuesday, with its shares up 2.4% after the decision bell. The results and Microsoft helped boost shares of Amazon.com Inc (AMZN.O), another major cloud player, up 4.8% in after-hours trading.
Microsoft’s revenue rose 7% to $52.9 billion in the quarter ending in March, beating analysts’ previous estimate of $51.02 billion, according to Refinitiv.
The bulk of Microsoft’s sales still comes from selling software and cloud computing services to customers. But the company made headlines this year with its partnership with ChatGPT creator OpenAI and the AI facelift of the Bing search engine.
CEO Satya Nadella told investors on a conference call that the company has more than 2,500 Azure-OpenAI service customers and said AI is built into a wide range of products.
Nadella said Bing, also a longtime Google search engine, has 100 million daily users and has seen an increase in downloads since adding the AI features.
Analysts expected the bleak economic outlook to hurt Microsoft’s Windows business, which relies heavily on PC sales that have slumped in recent quarters. The sales decline in this segment was less severe than analysts expected, with Microsoft reporting revenue of $13.3 billion versus analyst estimates of $12.19 billion, according to Refinitiv data.
The company’s productivity segment, which includes Office software and advertising sales for the social networking site LinkedIn, also beat analyst expectations with revenue of $17.5 billion versus estimates of $16.99 billion, according to Refinitiv.
Additional reporting by Yuvraj Malik in Bengaluru; Editing by Magu Samuel and David Gregorio
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