Microsoft has reported a 20% rise in quarterly profits as the tech giant continues to push its AI products, aiming to establish itself as a leader in utilising artificial intelligence technology to boost workplace productivity.
The company announced a net income of $21.93billion, or $2.94 per share for the January-March quarter, surpassing Wall Street’s predicted earnings of $2.82 a share. The Washington-based software creator recorded revenue of $61.86billion during this period, marking a 17% increase from the same time last year.
This figure exceeded analysts’ expectations, who had forecasted Microsoft to post revenue of $60.86billion for the quarter. While Microsoft doesn’t disclose the exact earnings from its AI products, including its flagship Copilot chatbot capable of composing documents, writing code and generating images, it has integrated the technology into its primary business areas such as cloud computing contracts and subscriptions for its email and other online services.
The company’s cloud computing business segment saw a quarterly revenue growth to $26.7billion, a 21% increase from last year’s January-March quarter. Revenue from Microsoft’s productivity services, including its Office line of products, rose by 12% to $19.6billion.
Businesses are charged $30 per employee each month by Microsoft to add Copilot to a workplace subscription for its package of services that includes email and spreadsheets.
Gartner analyst Jason Wong has revealed that while many of Microsoft’s customers are keen to experiment with generative AI, not all have a concrete plan for practical use that justifies the cost. “It’s still very early,” Wong commented.
Microsoft’s generative AI products heavily depend on its multi-billion-pound investments in business partner OpenAI, the creator of ChatGPT. Earlier this week, Microsoft also launched a new set of leaner homegrown AI language models named Phi-3 and has been collaborating with other startups – such as France’s Mistral – to offer a range of AI systems through Microsoft’s Azure cloud computing platform.
However, some of these partnerships are currently under regulatory scrutiny in Europe and the US due to concerns they might stifle competition in the AI industry. While Microsoft continues to drum up excitement for an AI-driven future, it still faces challenges in bolstering its legacy computer services.
Earlier in April, a federal cybersecurity safety board issued a damning report stating that “a cascade of errors” by the tech giant allowed state-backed Chinese cyber operators to hack into email accounts of senior US officials. The report blamed poor cybersecurity practices, a lax corporate culture and a lack of honesty about the company’s knowledge of the targeted breach.
The report concluded that “Microsoft’s security culture was inadequate and requires an overhaul” given the company’s crucial role in the global technology ecosystem. Companies dependent on Microsoft for email and other workplace solutions are keeping a keen eye on the tech giant’s response to recent concerns, according to Wong.
“Certainly there are clients that are interested in understanding how Microsoft goes forward to be more careful about their own internal policies when it comes to security,” he noted. The personal computing division of Microsoft, which is largely driven by its Windows operating system licensing, reported a robust $15.6 billion in revenue for the quarter, marking a 17% increase from the previous year.
Following the earnings report, Microsoft shares saw an approximate 4% uptick in after-hours trading on Thursday. Microsoft has announced plans to ramp up investment in the near future to bolster the infrastructure required for developing and deploying AI technologies.
“Near-term AI demand is a bit higher than our current capacity,” Microsoft’s chief financial officer Amy Hood revealed during an earnings call on Thursday.
