Microsoft Corp.'s cloud unit grew at the fastest clip in four years and the pace is accelerating, suggesting the company's AI and computing services are making inroads with customers.
Azure cloud revenue rose 43% during the fiscal fourth quarter, the company said Wednesday in a statement. That was the fastest quarterly growth since early 2022 and topped analysts' average estimate for a 40% increase. Azure revenue surpassed $100 billion for the first time during the fiscal year ended in June.
Chief Financial Officer Amy Hood said she expected growth in the cloud unit to accelerate further in the current quarter, to about 45%. “Demand continues to exceed available supply,” she said during a conference call with analysts.
She also indicated that Microsoft would hold the line on new capital spending this year, which helped send the shares up about 8% in extended trading. The stock had fallen about 19% this year through Wednesday's close amid concerns about the massive outlays.
Since ushering in the artificial intelligence boom with partner OpenAI, Microsoft has shifted its focus to AI models and software capable of acting autonomously. These products require enormous computing power, and the company has joined an industrywide spending frenzy to build new data centers and buy the chips required to handle AI services.
Capital expenditures — a key metric of data center spending — increased 70% to $41 billion in the quarter. Analysts had expected $42 billion.
Hood said the company had determined that its data centers and office buildings would likely prove useful for an additional 10 years, a change that will shift some of the company's capital expenditures to operating costs.
The net effect: Microsoft's capital spending will likely land at roughly $175 billion this year, versus a prior forecast of $190 billion. But outside of that accounting tweak, the company's 2026 investment expectations “remain unchanged,” Hood said.
That could ease investor concerns about the company's massive outlays on data centers and chips even as investors continue to question the spending by some of Microsoft's peers.
Google parent Alphabet Inc. last week raised its spending outlook, and Meta Platforms Inc. on Wednesday increased the low end of its own forecast for capital expenditures. Both saw their shares fall. Amazon.com Inc., which is also spending heavily on data centers, is scheduled to report financial results on Thursday.
Microsoft Chief Executive Officer Satya Nadella said the company now counted more than 30 million paid users of Microsoft 365 Copilot, the AI assistant sold as an add-on to the ubiquitous Office software. That's up from roughly 20 million three months earlier.
The step-up in paid Copilot users is a good result, Bloomberg Intelligence analyst Mandeep Singh said in an interview on Bloomberg TV. “The bundling strategy that Microsoft has continues to work.”
Total revenue increased 18% to $90 billion, beating average estimates for $87.7 billion. Profit was $4.81 per share, compared with a per-share estimate of $4.25. That included a 33 cents-a-share boost from the value of the Microsoft's investment in AI lab Anthropic PBC.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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