Microsoft Corporation (MSFT:NASDAQ)

Last update - 25 October 2023 By James Woods

Microsoft (MSFT) shares climbed 4% in after-hours trading on Tuesday after reporting Q3 results that surpassed analyst estimates, boosted by its cloud computing business.

Overall, the results are strong and point to resilience by MSFT despite macroeconomic headwinds as businesses move further towards cloud computing and integrating artificial intelligence.

Microsoft’s Q3 results highlighted a revenue of $56.52 billion, marking a 13% year-on-year increase and exceeding estimates of $54.54 billion. Among the various segments, the Intelligent Cloud revenue stood out at $24.26 billion against a forecast $23.61 billion. Earnings per share (EPS) also soared to $2.99, a marked improvement from the previous year’s $2.35 and better than the expected $2.65.

The latest figures mark MSFT’s highest sales in six quarters, driven by a re-acceleration of growth in cloud computing was especially instrumental, given the rising demand for new artificial intelligence (AI) products. This demand has encouraged corporate clients to ramp up spending and the growth of Azure cloud-services sales was noteworthy at 29% year-on-year, a bump from the 26% growth in Q2. During a call, management noted they also expect to see Azure revenue grow around 26-27% for the final quarter of the calendar year.

The company’s ongoing strategic partnership with OpenAI points to an optimistic outlook, with a surge in corporate clientele eager to integrate technologies like ChatGPT into their operations. The newer AI-enhanced version of its Office software suite is a testament to Microsoft’s commitment to infuse cutting-edge technology into its product offerings and its importance for businesses.

The upcoming release of the corporate version of Microsoft 365 Copilot, an AI assistant for key Office programs, indicates the company’s strategic approach towards monetising its AI products. Moreover, Microsoft’s integration of ChatGPT technology into its Bing search engine has bolstered advertising sales, with the quarter seeing a 10% uptick in search and news advertising sales.

Looking ahead, the recent completion of Microsoft’s $69 billion acquisition of Activision Blizzard Inc. signifies a significant moment in the company’s timeline, even though the effects of this major transaction will only be reflected in subsequent quarters.

Overall, the results showcase robust performance, and understandably investors are cheering the update given the move in shares in after-hours trading. With its cloud and AI-centric strategies generating results, MSFT looks well positioned as a key beneficiary in the growing digital transition and upgrading of IT, and the outlook for the share price remains promising.

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