Microsoft Beats Wall Street Estimates As Quarterly Profit Rises 9%

Tech giant Microsoft announced its results for the quarter ended 31 March, 2023 on Tuesday where it beat the Wall Steet estimates for quarterly revenue and profit.

Microsoft registered revenue of USD 52.9 billion in the quarter, up 7 per cent (up 10 per cent in constant currency). Wall Street expected it to turn in a revenue of USD 51.02 billion in Q3 FY23.

The company’s net profit rose by 9 per cent (up 14 per cent in constant currency) at USD 18.3 billion for the quarter. Meanwhile, Microsoft’s operating income was USD 22.4 billion, which rose by 10 per cent (up 15 per cent in constant currency).

Microsoft’s growth in the quarter ended 31 March, 2023 was driven by cloud computing and Office productivity software business. Also, the company said that the artificial intelligence (AI) was stimulating sales.

The revenue in Productivity and Business Processes was USD 17.5 billion and up 11 per cent (up 15 per cent in constant currency). Microsoft Cloud posted revenue of USD 28.5 billion, up 22 per cent (up 25 per cent in constant currency) year-over-year (YoY).

Microsoft returned USD 9.7 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2023.

Focus On AI

During the Q3 FY23 earnings call, Microsoft Chairman and CEO and Satya Nadella extensively spoke on the developments around artificial intelligence (AI). He said that AI was one of the focus areas for the company and Microsoft was investing to lead in the “new AI wave” across its solutions and expanding its Total Addressable Market (TAM).

“We have the most powerful AI infrastructure, and it’s being used by our partner OpenAI, as well as NVIDIA, and leading AI startups like Adept and Inflection to train large models,” he said during the earnings call.

“Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4, with the enterprise capabilities of Azure,” he added.

Nadella was jubilant in sharing that the company has over 2,5000 Azure OpenAI Service customers, which was up 10-times quarter-over-quarter (QoQ) in Q3 FY23. The customers for this service include Coursera, Grammarly, Shell, Mercedes-Benz and more.

On Copilot for Business, Nadella said the service was available to more than 10,000 organisations including Coca-Cola and GM, who were utilising it to increase the speed for their developers.

Speaking to BW Businessworld earlier in April, Samik Roy, Executive Director, Corporate, Medium, Small Business, Microsoft India, shared that Copilot and AI had been a huge hit among businesses in India. “The floodgates have opened. We have people lining up to try and understand how Copilot and AI can make their work and business more productive and efficient than ever before,” he said.

During the earnings call for Q3, the Microsoft CEO also shared that the company was going to introduce next generation AI to its Power Platform to enable workflow automation, creation of apps or web pages, virtual agents and data analysis using just natural language. “All-up, we now have nearly 33 million monthly active users of Power Platform, up nearly 50 per cent YoY,” Nadella said.

PC And Xbox Hardware Sales Hit Hard

In the Q3 FY23, Microsoft’s PC sales were affected in a big way as it fell 28 per cent due to an overall dip in PC sales globally.

According to a Gartner report, PC shipments in the quarter ended 31 March saw a 30 per cent decline due to unfavorable combination of oversupply and continued low PC demand due to economic uncertainties and a lack of purchase motivation.

Microsoft’s devices revenue decreased 30 per cent (down 26 per cent in constant currency) during Q3.

The revenue in More Personal Computing was USD 13.3 billion and decreased 9 per cent (down 7 per cent in constant currency). Commenting on this, Amy Hood, Chief Financial Officer of Microsoft said that the results were better-than-expected across all businesses.

Revenue from Xbox hardware also declined 30 per cent during the quarter.

Meanwhile, Windows Commercial products and cloud services revenue increased 14 per cent (up 18 per cent in constant currency) and Xbox content and services revenue increased 3 per cent (up 5 per cent in constant currency).