Microsoft on Wednesday reported financial results that could quell investor unease over its heavy spending on artificial intelligence.
Sales from July through September hit $65.6 billion, up 16 percent from a year earlier. Profit rose 11 percent, to $24.7 billion. The results surpassed Wall Street’s expectations and Microsoft’s own predictions.
At the same time, Microsoft showed little sign that it was putting the brakes on the blistering pace of its spending to build data centers for its A.I. work. The company spent $20 billion on capital expenditures, up 79 percent from a year earlier.
“We are expanding our opportunity and winning new customers as we help them apply our A.I. platforms and tools,” Satya Nadella, Microsoft’s chief executive, said in a statement.
The company’s executives had told investors that Microsoft expected sales to be constrained through the end of the year because its available data center capacity was not enough to meet customer demand.
The company has bet heavily on artificial intelligence through its investments in the start-up OpenAI. That relationship has given it “an enviable position as the vanguard of the new technology,” and Microsoft is gaining share from competitors, analysts for Raymond James wrote in a note to investors.
Since the summer of 2023, A.I. has helped stabilize the growth of Microsoft’s flagship cloud computing service, Azure. This past quarter, Azure’s growth held roughly steady at 34 percent, not including currency fluctuations. More than a third of that growth came from artificial intelligence, including selling access to OpenAI’s systems and providing computing power when customers use OpenAI’s directly from the start-up.
(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The two companies have denied the suit’s claims.)
Investors were somewhat unsure about what to expect for the quarter, because in August, Microsoft said it was tweaking which products were included in certain metrics it reported. Microsoft’s share price rose about 1.5 percent in after-hours trading on Wednesday.
Investors have been jittery about Microsoft’s capital spending because they have “limited visibility” into whether and how the spending produces solid returns on the investments, analysts from Bank of America wrote in a recent note.
The company does not disclose sales of its own A.I. assistants, which cost business customers $30 per month, but its overall Microsoft 365 commercial cloud revenue, which includes Excel, Team and Word, was up 15 percent.
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