Microsoft’s third-quarter earnings boosted by cloud, office productivity businesses

Microsoft’s earnings were boosted by the growth in its cloud and office productivity businesses as the company reported better than expected top and bottom-line numbers in its financial results for the quarter ended March 31, 2023, the third quarter of its financial year.

The Windows maker’s net profit in the quarter was $18.3 billion, up 9% as compared to the corresponding period of the last fiscal year. Its first-quarter revenue increased 7% to $52.8 billion from $49.3 billion in the year-ago period.

Microsoftis the second-largest player in the cloud computing space, followed by Amazon Web Services. Its cloud revenue in the quarter was $28.5 billion, up 22% year-over-year. Google, which competes with the duo in the cloud computing space, also witnessed growth in cloud business in its last quarter.

“Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend,” Microsoft Chairman and Chief Executive Officer Satya Nadella, said in a statement.

“Azure took share as customers continue to choose our ubiquitous computing fabric from cloud to edge, especially as every application becomes AI-powered,” he noted, during the third-quarter earnings call, adding that the company’s artificial intelligence (AI) infrastructure is being used by its partner, OpenAI, and leading AI start-ups to train large models.

Microsoft, which has already committed a $10 billion investment in OpenAI, the creator of ChatGPT, said that AI will boost its revenue growth.

“We are excited about the early feedback and demand signals for the AI capabilities we have announced to date,” Amy Hood, Executive Vice President and Chief Financial Officer of Microsoft, said during the earnings call.

“We will continue to invest in our cloud infrastructure, particularly AI-related spend as we scale with the growing demand, driven by customer transformation. And we expect the resulting revenue to grow over time,” she added.

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The Redmond-headquartered firm broadly categorises its revenue under three segments — Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

Revenue in Productivity and Business Processes was $17.5 billion in the quarter, up 11%  year-over-year. Revenue from Intelligent Cloud increased 16% to $22.1 billion in the March-ended quarter. 

More Personal Computing — which includes revenues from Windows OEM, Devices, Xbox content and services, Search and news advertising, as well as Windows Commercial products and cloud services — was down 9% to $13.3 billion in the quarter.

The company’s business and employment-oriented online service LinkedIn’s revenue increased by 8%, driven by growth in talent solutions, Hood said.

According to Nadella, LinkedIn witnessed record engagement with more than 930 million members using the professional social network to connect, learn, sell and get hired. 

“Member growth accelerated for the seventh consecutive quarter as we expanded to new audiences. We now have 100 million members in India,” he noted.

For Microsoft, a main focus area. The company has made significant progress on that front in the last few years, including the launch of its next-generation consoles, cloud gaming, and its $68.7 billion proposed acquisition of ‘Call of Duty' maker Activision Blizzard. 

The Windows maker continues to work towards closing the deal in fiscal year 2023, according to Hood. It would be Microsoft’s largest-ever and the biggest gaming industry deal.

Speaking about the outlook for the next quarter, Hood said, “We expect customer demand for our differentiated solutions, including our AI platform and consistent execution across the Microsoft Cloud to drive another quarter of healthy revenue growth.”

“We remain committed to aligning cost and revenue growth to deliver disciplined profitability,” she added.