Microsoft shares slipped Tuesday after the tech giant reported quarterly profit climbed but its crucial cloud computing unit missed expectations.
Microsoft said it made a profit of $22 billion on $64.7 billion in revenue in the recently ended quarter, up from the same period a year earlier.
Cloud unit revenue of $36.8 billion, however, disappointed investors and shares slid more than five percent to $401.06 in after-market trades.
Money brought in from cloud computing has driven blockbuster earnings quarter after quarter, and a hint that stellar growth may be slowing was enough to give investors pause.
Microsoft is among the major contenders in the fierce race to build out artificial intelligence systems, pouring billions of dollars into the technology in the hope it will pay off.
Microsoft is among the best positioned to monetize generative AI, having moved the fastest to implement it across all its products, and pouring $13 billion into OpenAI, the start-up stalwart behind ChatGPT.
Winning the big bet on AI is “crucial” for the group, said Jeremy Goldman of Emarketer, “but the market is willing to give them a level of patience.”
The AI frenzy has helped Microsoft’s cloud computing business grow in the double digits, which analysts said could be hard to sustain.
“This type of growth cannot hold forever, but the synergies between cloud and AI make it more likely that Microsoft holds onto reliable cloud growth for some time to come,” Goldman said.
Revenue from Microsoft’s AI-infused “Intelligent Cloud” unit was $28.5 billion, a 19-percent increase from the same quarter a year earlier, according to the earnings figures.
Microsoft’s “Azure” drove a strong increase in revenue from server products and cloud services, according to the company.
“We closed out our fiscal year with a solid quarter, highlighted by record bookings and Microsoft Cloud quarterly revenue,” Chief Financial Officer Amy Hood said in an earnings release.
Microsoft Chief Executive Satya Nadella added that the company is “focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era.”
Microsoft reported a net income of $88.1 billion for its fiscal year on revenue of $245.1 billion, up 22 percent and 16 percent respectively.
Money taken in by Microsoft’s Xbox video game unit leaped 61 percent, boosted by the acquisition of Activision, according to earnings figures.
Microsoft said costs to attract visitors to its search and news services rose 19 percent, as it enhanced services with AI to better compete with Google.
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