Microsoft cloud revenue beats expectations

Microsoft’s shares climbed about 4 per cent in after-hours trading on Wednesday, boosted by better than expected earnings in its cloud business as demand for AI continues to drive growth.

The software giant on Wednesday reported its revenue rose 19 per cent to $92.3bn in the three months to September 30, beating Wall Street’s expectations of $90.6bn.

Sales in its Azure division were $33.2bn, up 48 per cent from $22.4bn a year ago, as the company reorganised its reporting to disclose sales in the cloud business for the first time. Analysts expected $32.3bn.

Microsoft, like its Big Tech rivals, is investing hundreds of billions into AI infrastructure to meet what it says is relentless demand for data centre capacity to develop and run models and applications.

Net income rose 32 per cent from the previous year to $36.6bn.

Capital expenditure in the quarter came in at $45.2bn, below expectations. The company previously told investors it planned to invest roughly $175bn in the current calendar year.

Meanwhile, free cash flow for the quarter was $18.6bn, higher than analysts anticipated but lower than the previous quarter’s figure, which came in at $19.6bn.

Microsoft on Monday said it would offer buyout packages to up to 60,000 staff as it tries to keep costs under control and pare its workforce. The decision, which will affect employees in the US, Canada, UK and India, comes after it made a “voluntary retirement programme” available to older, longer-serving staff in April.

The company on Wednesday said headcount fell 2 per cent year-on-year.

Microsoft also disclosed its contracted backlog for data centre capacity had fallen to $677bn, down slightly from $678bn the previous quarter.