Microsoft shares jump 8.5% on surge in net profit

Company’s net profit surged to $18.3 billion in the three months to the end of March

Microsoft's revenue during the January-March period jumped 7 per cent to $52.9 billion. Bloomberg

Microsoft's shares jumped after the company said its fiscal third quarter net profit had surged nearly 9 per cent on an annual basis, driven by strong cloud business in different markets.

The company’s net profit jumped to $18.3 billion in the three months to the end of March, from the same period a year earlier, the company said in a statement on Tuesday.

Revenue during the January-March period jumped 7 per cent to $52.9 billion, exceeding analysts' expectations of $51.02 billion.

The company's stock, which has gained 15 per cent since the start of this year, surged 8.5 per cent in after-hours trading on Tuesday. The company’s share price was $275.42 at market close giving Microsoft a market value of $2.05 trillion.

Revenue in Microsoft’s intelligent cloud division, which includes Azure public cloud, increased 16 per cent annually to $22.1 billion. Sales from Azure and other cloud services, which Microsoft does not report in dollars, grew by about 27 per cent.

Satya Nadella, chairman and chief executive of Microsoft. EPA

“The world’s most advanced AI [artificial intelligence] models are coming together with the world’s most universal user interface — natural language — to create a new era of computing,” said Satya Nadella, Microsoft’s chairman and chief executive.

“Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”

Since 2016, Microsoft has committed to building Azure into an AI supercomputer for the world, serving as the foundation of its vision to democratise AI as a platform.

The company’s last quarter diluted earnings increased 10 per cent to $2.45 a share, compared to the $2.23 a share expected by analysts, Refinitiv reported.

Its operating income surged 10 per cent to $22.4 billion in the previous quarter compared to the prior year period.

“Focused execution by our sales teams and partners in this dynamic environment resulted in [increased] Microsoft cloud revenue,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

The company's productivity and business processes division, which includes both its Microsoft Office business and revenue from LinkedIn, surged 11 per cent to $17.5 billion in the March quarter.

LinkedIn revenue increased almost 8 per cent annually. Microsoft did not give a dollar figure for its LinkedIn revenue and did not disclose the number of users.

Microsoft 365 Consumer — a bundle of various apps — subscribers increased to 65.4 million at the end of the last quarter, up 12 per cent on a yearly basis, the company said.

Sales in the personal computing division dipped 9 per cent to $13.3 billion in the quarter.

Search and news advertising revenue excluding traffic acquisition costs increased 10 per cent, while devices revenue decreased 30 per cent.

Xbox content and services revenue increased 3 per cent in the third quarter.

LinkedIn revenue increased almost 8 per cent annually in the last quarter. Bloomberg

Microsoft also returned $9.7 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2023, a decrease of 21.7 per cent compared to the third quarter of fiscal year 2022.

The company spent almost $7 billion on research and development, about 13.2 per cent of its total sales in the quarter. This is 10.7 per cent more than what was spent on R&D in the same period in 2022.

Microsoft’s total cash, cash equivalents and short-term investments stood at more than $104.4 billion by the end of the March quarter.

In January, Microsoft announced it was laying off 10,000 of its 221,000 employees to adjust to changing macroeconomics and to cut overall costs, amid a wave of industry layoffs.

In the same month, Microsoft announced the third phase of its long-term partnership with ChatGPT-maker OpenAI through a new multiyear, multibillion-dollar investment. The agreement follows Microsoft’s previous investments in the company in 2019 and 2021.