Microsoft Corp. has firmly embraced the artificial intelligence (AI) revolution, and its latest financial results are a testament to the company’s successful AI strategy. In the third quarter of fiscal year 2024, Microsoft reported impressive growth across its business segments, fueled by the surging demand for its AI offerings.
The tech giant announced revenue of $61.9 billion for the quarter ended March 31, 2024, a remarkable 17% increase compared to the same period last year. Operating income soared 23% to $27.6 billion, while net income climbed 20% to $21.9 billion. Diluted earnings per share also saw a 20% increase, reaching $2.94.
The company’s cloud business, a key driver of its AI initiatives, continued its strong momentum. Microsoft Cloud revenue reached $35.1 billion, up 23% year-over-year, driven by robust execution from the company’s sales teams and partners.
“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry. “
Satya Nadella, chairman and chief executive officer of Microsoft.
“This quarter Microsoft Cloud revenue was $35.1 billion, up 23% year-over-year, driven by strong execution by our sales teams and partners,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
Productivity and Business Processes
Microsoft’s Productivity and Business Processes segment, which includes Office 365, Dynamics, and LinkedIn, experienced a 12% revenue increase to $19.6 billion. Office Commercial products and cloud services revenue grew 13%, fueled by a 15% rise in Office 365 Commercial revenue. Additionally, the company’s Dynamics products and cloud services revenue surged 19%, driven by a 23% growth in Dynamics 365 revenue.
Intelligent Cloud
The Intelligent Cloud segment, the backbone of Microsoft’s AI efforts, saw revenue soar 21% to $26.7 billion. Server products and cloud services revenue increased 24%, propelled by a 31% growth in Azure and other cloud services revenue.
More Personal Computing
The More Personal Computing segment, which encompasses Windows, Devices, and Xbox, reported a 17% revenue increase to $15.6 billion. Windows revenue grew 11%, with Windows OEM revenue and Windows Commercial products and cloud services revenue increasing by 11% and 13%, respectively. However, Devices revenue declined 17%, partially offsetting the segment’s growth.
AI Demand Outstrips Capacity
Microsoft’s impressive financial performance can be attributed to the strong demand for its AI offerings, including the Microsoft Copilot and Copilot stack. During the earnings call, Satya Nadella emphasized that the company is “seeing a new era of AI transformation driving better business outcomes across every role and industry.”
However, the soaring demand for AI has also created challenges for Microsoft. CFO Amy Hood acknowledged that the company is currently experiencing near-term AI demand that outstrips available capacity. To address this issue, Microsoft spent a record $14 billion on capital expenditures in the quarter, including new data centers and computing infrastructure to train and run AI models.
Looking ahead, Hood stated that capital expenditures will increase in the next fiscal year as Microsoft continues to scale its AI investments. The company is closely monitoring other expenses to ensure that the increased investments in AI do not adversely impact profitability.
Microsoft’s strong financial performance and unwavering commitment to AI highlight the company’s pivotal role in shaping the future of technology. As the AI revolution gains momentum, Microsoft’s ability to meet the surging demand for its AI offerings will be crucial to maintaining its competitive edge and driving long-term growth.
