Microsoft's earnings jump 33% on strong cloud business

Company's net profit in its fiscal second-quarter ending December jumped to $21.9bn

Microsoft's revenue during the October-December period jumped 18 per cent to more than $62 billion. Getty Images

Microsoft reported a 33 per cent surge in its fiscal 2024 second-quarter net profit on robust Azure cloud business and double-digit growth in quarterly revenue that surpassed analysts' expectations.

Its net profit jumped to $21.9 billion in the three months to the end of December. The company’s profit was driven by strong productivity and cloud businesses.

Microsoft’s financial year ends in June.

Revenue during the October-December period jumped 18 per cent to more than $62 billion, exceeding analysts' expectations of $61.1 billion.

The company's stock, which has gained more than 10 per cent since the start of this year, dropped more than 1.2 per cent to $403.60 a share in after-hours trading on Tuesday.

Its share price was $408.59 at market close, giving Microsoft a value of $3.04 trillion.

Microsoft surpassed Apple to become the world's most valuable public company on January 12. Apple’s market capitalisation stood at $2.91 trillion on Tuesday.

“We’ve moved from talking about AI [artificial intelligence] to applying AI at scale,” said Satya Nadella, chairman and chief executive of Microsoft.

“By infusing AI [artificial intelligence] across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains across every sector.”

Revenue in Microsoft’s intelligent cloud division, which includes Azure public cloud, increased 20 per cent annually to $25.9 billion, higher than the $25.2 billion consensus of analysts surveyed by StreetAccount.

Sales from Azure and other cloud services, which Microsoft does not report in dollars, grew by about 30 per cent.

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 said.

“Microsoft exceeded both revenue and earnings per share expectations this quarter, thanks to a strong performance in its key Azure cloud business as well as fresh initiatives in AI,” Jesse Cohen, senior analyst at Investing.com, told The National.

“Microsoft is firing on all cylinders and AI is clearly driving growth … the results indicated that AI products are stimulating sales and already contributing to top and bottom-line growth.”

Earlier this month, the Redmond, Washington-headquartered technology company announced the addition of a new Copilot key on the Windows keyboard in a move aimed at supporting the adoption of AI in its hardware products.

The key, which will be available in laptops and personal computers manufactured by Microsoft and its partners, will grant users immediate access to the AI-driven Windows Copilot experience, the company said.

The company’s last-quarter diluted earnings increased 33 per cent to $2.93 a share, compared to the $2.78 a share expected by analysts.

Its operating income surged 33 per cent to $27 billion.

The company's productivity and business processes division, which includes both its Microsoft Office business and revenue from LinkedIn, surged 13 per cent to $19.2 billion in the December quarter.

LinkedIn revenue increased almost 9 per cent annually. Microsoft did not give a dollar figure for its LinkedIn revenue and did not disclose the number of users.

Subscribers to Microsoft 365 Consumer – a bundle of various apps – increased to 78.4 million at the end of the last quarter, up 2.2 per cent on a quarterly basis, the company said.

Sales in the personal computing division surged 19 per cent to $16.9 billion in the quarter.

Search and news advertising revenue excluding traffic acquisition costs increased 8 per cent, while devices revenue decreased 9 per cent.

Xbox content and services revenue increased 61 per cent in the last quarter driven by the $69 billion acquisition of Activision, the gaming company behind Call of Duty, Overwatch and World of Warcraft. Completed in October, the deal was one of the largest tech transactions in history.

Microsoft also returned $8.4 billion to shareholders in the form of share repurchases and dividends in the last quarter.

The company spent more than $6.8 billion on research and development, about 13 per cent of its total sales in the quarter.

Microsoft’s total cash, cash equivalents and short-term investments stood at more than $81 billion as of December 31, compared with $111.2 billion at the end of June.