Microsoft Reports 10% Quarterly Profit Growth

Microsoft has announced that its profits for the October-December quarter grew by 10%. This growth comes as the tech giant continues to invest heavily in advancing its artificial intelligence technology.

Despite the positive overall results, Microsoft did report a slight miss in its predictions for cloud computing revenue, an area that is crucial for its AI initiatives. During this quarter, the company reported a net income of $24.1 billion, which translates to $3.23 per share, exceeding analysts' expectations of $3.11 per share. Microsoft's total revenue for the quarter was $69.6 billion, reflecting a 12% increase from the same period last year and also beating Wall Street forecasts.

Analysts surveyed by FactSet anticipated that Microsoft would generate approximately $68.87 billion in revenue during the last three months of the year.

Revenue from Microsoft's cloud services, which includes the popular Azure computing platform, grew by 19% year-over-year to $25.5 billion. However, this figure fell short of the $25.83 billion that FactSet analysts had projected.

In contrast, the company's productivity segment, which includes its Office suite of products, grew by 14%, reaching a total of $29.4 billion. Meanwhile, the personal computing division, primarily driven by Windows, remained stable at $14.7 billion, with declines in consumer device sales balanced by an increase in advertising revenue related to the Bing search engine.

After the announcement, Microsoft's shares fell by 5% in after-hours trading on Wednesday, although they were still higher than the company's stock value on Monday, which was affected by a broader sell-off in tech stocks. This sell-off was triggered by concerns over a competitor to ChatGPT, developed by the Chinese tech startup DeepSeek.

Microsoft has a close partnership with OpenAI, the creator of ChatGPT, and also offers its own AI chatbot services under the name Copilot. The investor panic was heightened by DeepSeek's claims that it was rapidly closing the gap with U.S. tech companies while spending much less.

During an investor call, Microsoft CEO Satya Nadella addressed these concerns, highlighting that DeepSeek's innovations could benefit the industry by providing greater efficiency and lower prices in AI development. He noted that this could lead to increased consumption and the creation of more applications.

On the same day, Microsoft added DeepSeek's latest AI model to its Azure computing platform. Microsoft has previously stated that operating and building AI systems is expensive, and the company plans to invest around $80 billion this year to expand its global network of data centers, which require a significant amount of energy and specialized chips for AI model training and operation.

Nadella mentioned that Microsoft has more than doubled its overall data center capacity over the past three years, with last year seeing the highest addition of capacity in the company's history.

Microsoft, profits, cloud, AI, revenue