by Microsoft Corp. announced that its profit for the October-December quarter has skyrocketed by 33%. The significant increase can be attributed to its substantial investments in artificial intelligence (AI) technology. Microsoft is primarily focusing its AI investments in its cloud computing unit, which has seen remarkable growth. The company reported a net income of $21.87 billion for the quarter, equivalent to $2.93 per diluted share. These figures have surpassed market expectations of $2.79 per share. Furthermore, Microsoft’s revenue for the quarter reached $62.02 billion, displaying an 18% increase from the previous year’s $52.75 billion, once again surpassing expectations.
Microsoft’s dedication to AI technology is positioning it as a frontrunner in the race. Jeremy Goldman, the director of briefings at Insider Intelligence, believes that AI can benefit Microsoft by expanding its share of the digital advertising market. Insider Intelligence forecasts that Microsoft’s worldwide advertising revenues will grow by 12% this year, amounting to $14.93 billion. However, it is worth noting that Google is anticipated to expand its larger ad business by 10% during the same period.
Analysts surveyed by FactSet Research projected that Microsoft would generate revenue of $61.14 billion. Additionally, they currently expect revenue of $60.97 billion for the upcoming January-March quarter. These results include the financial performance of video game producer Activision Blizzard, which Microsoft acquired on October 13 in a $69 billion deal. The merger has contributed to a four-point increase in Microsoft’s revenue growth, as stated by James Ambrose, the company’s director of investor relations. However, it has also reduced operating profits by approximately $440 million due to purchase accounting adjustments and integration and transaction costs.
Initially, Microsoft’s shares experienced a decline in after-hours trading, dropping nearly 2% to $400.86. Nevertheless, the shares later recovered most of the loss. Analysts believe that investors were initially concerned about Microsoft’s aggressive investment plans.
Among its different business segments, Microsoft’s cloud-focused division witnessed the highest growth, with revenue expanding by 20% to $25.88 billion compared to the same period last year.
The revenue from Microsoft’s Office suite, which includes email and other workplace products, alongside the professional social network LinkedIn, grew by 13% to $19.25 billion for the quarter.
Furthermore, the personal computing division led by Windows, which encompasses Xbox video games and services, experienced a 19% growth, with revenue amounting to $16.89 billion. These figures reflect the significant impact of integrating Activision Blizzard into the segment. Microsoft witnessed a 61% increase in revenues related to Xbox during the quarter, but 55% of that growth can be attributed to the addition of Activision, renowned for producing the incredibly successful Call of Duty series.
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1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
