Microsoft beats on Q1 top and bottom lines on cloud strength

Microsoft (MSFT) reported its fiscal first quarter earnings after the bell on Wednesday, beating on the top and bottom lines on the strength of its cloud business. Microsoft stock was up about 2% in after-hours trading following the release.

Microsoft is one of the biggest beneficiaries of the AI boom, thanks to the billions it has invested in its cloud infrastructure and ChatGPT developer OpenAI. But it’s also facing headwinds, including increasing competition from the likes of Amazon (AMZN), Google parent Alphabet (GOOG, GOOGL), and Salesforce (CRM), which have developed or are developing their own OpenAI rivals.

“AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process,” Microsoft CEO Satya Nadella said in a statement.

“We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage.”

For the quarter, Microsoft saw earnings per share (EPS) of $3.30 on revenue of $65.6 billion. Analysts were expecting EPS of $3.10 and revenue of $64.5 billion, based on analyst consensus estimates compiled by Bloomberg. The company reported EPS of $2.99 on revenue of $56.5 billion during the same quarter last year.

Microsoft’s commercial cloud revenue, which includes cloud services sales, came in at $38.9 billion versus expectations of $38.1 billion. The company’s Intelligent Cloud segment, which includes its Azure business, brought in $24.1 billion in the quarter, up 20% year over year. Microsoft said it saw 12 points of growth from AI services in Azure.

Microsoft also reported Productivity and Business Processes segment revenue of $28.3 billion, a 12% year-over-year increase. The segment includes sales of Microsoft’s Microsoft 365 services.

The company also reported growth in its More Personal Computing business, with revenue climbing 17% to 13.2 billion.

The PC market is in the early innings of a recovery after sales collapsed following the enormous growth around the onset of the pandemic. Microsoft, along with its manufacturing partners, is also pushing a new class of computers known as Copilot+ PCs.

Copilot+ PCs, or laptops with the power to perform on-device AI processes, are the PC industry’s attempt to capitalize on the AI hype story.

Microsoft stock is up some 28% over the last 12 months. And while that’s certainly nothing to shrug off, it’s lower than the broader S&P 500 (^GSPC), which is up 41%. Google parent Alphabet’s stock is up 42%, while Amazon shares are up 49% during the same period.

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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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