Microsoft cloud growth defies fears of corporate slowdown

Microsoft’s cloud division continued to drive better-than-expected quarterly earnings, dispelling fears that growth would decelerate as corporate clients keep costs in check and try to do more with less.

The company’s intelligent cloud unit — its biggest revenue driver, led by Azure, its public cloud computing platform — recorded revenue of $22.1bn in the three months to the end of March, a gain of 16 per cent from a year ago and ahead of forecasts for $21.8bn. Revenues at Azure, which had grown 49 per cent excluding currency moves one year ago, were up 31 per cent year-on-year, ahead of consensus forecasts.

“Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI,” Microsoft chief executive Satya Nadella said in the earnings release on Tuesday.

Microsoft is making a big bet on the development of artificial intelligence technology through its partnership with, and investment in, start-up OpenAI, the maker of ChatGPT.

“The world’s most advanced AI models are coming together with the world’s most universal user interface — natural language — to create a new era of computing,” Nadella said.

The $2tn tech giant said on Tuesday that overall revenue in the quarter was up 7 per cent to $52.9bn, beating forecasts for $51bn, according to Refinitiv.

Net income rose 9 per cent to $18.3bn, well ahead of forecasts of $16.6bn. Excluding currency headwinds, the gain was 14 per cent.

The company’s shares, which were up 15 per cent year-to-date, jumped more than 4 per cent in after-hours trading.

The revenue and net income beats come three months after the group shed 10,000 jobs — 5 per cent of its workforce — in an attempt to cut costs after the boom in digital services during Covid-19 waned.

The group’s “more personal computing” division, which comprises Windows licensing, device sales and Xbox, brought in $13.3bn, down 9 per cent but ahead of forecasts of $12.2bn.

The productivity and business processes unit, which houses Office subscriptions and LinkedIn, earned $17.5bn of revenue a gain of 11 per cent and higher than forecasts of $16.5bn.