Microsoft beats expectations for Q3 earnings led by AI, cloud

[Courtesy of Microsoft]

Global tech giants achieved strong third-quarter results thanks to their strategies focusing on artificial intelligence (AI) and cloud.

Microsoft Corp., the second-largest U.S. company by market capitalization, unveiled third-quarter results Tuesday, local time, which exceeded market expectations. The company reported a revenue of $56.5 billion, up 13 percent from a year earlier.

Operating income also rose by 25 percent to $26.9 billion, while net profit came to $22.3 billion, up 27 percent.

Microsoft’s earnings per share (EPS) surpassed market predictions, coming in at $2.99 per share. The encouraging performance led to a 3.95 percent jump in Microsoft’s share price in after-hours trading.

The growth engine behind Microsoft’s strong performance is its cloud business. Revenue from server products and cloud services saw a 21 percent increase, with cloud services like Azure experiencing a 29 percent growth. Enterprise Office products also showed strength, with a 15 percent growth rate.

One of Microsoft’s strategic highlights is its investment in OpenAI, the creator of ChatGPT, and the provision of these services through its cloud offerings. This strategy has proven successful, positioning Microsoft as a leader in AI and cloud services.

Alphabet, Google’s parent company, also posted strong results but Google’s cloud business failed to meet expectations, leading to a drop in the share price after market close.

Alphabet reported Q3 quarterly revenue of $76.69 billion, with operating income of $21.34 billion and net income of $19.68 billion. Its EPS came in at $1.55, slightly above market expectations.

Google’s overall revenue showed growth, rising by 11 percent, and operating margins reached 28 percent.

The company’s cloud business also posted a quarterly operating profit of $266 million, marking its third consecutive quarter in the black. The cloud business revenue was $8.4 billion, up 22 percent from the previous quarter.

However, Alphabet’s stock fell 6 percent after the close as cloud revenue growth fell short of market expectations of $8.6 billion.

The majority of Google’s revenue still comes from advertising, with $44 billion in search ad revenue, while YouTube advertising contributed $7.9 billion.