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AI and cloud growth drives first-quarter revenue growth for Microsoft

Microsoft

Microsoft has reported strong results for the first quarter of its fiscal 2024, driven by continued growth in its cloud and artificial intelligence businesses. The company reported revenue of $51.800 billion, up 18% year over year, and net income of $17.600 billion, up 25% year over year. Both figures exceeded analysts' expectations.

Microsoft
Microsoft

The company's Intelligent Cloud segment, which includes Azure, Windows Server, SQL Server and GitHub, contributed the most to its revenue growth, with $19.700 billion in revenue, a 28% year-over-year increase. Azure, Microsoft's cloud computing platform, grew 51%, outperforming the overall cloud market. Microsoft attributed Azure's success to its innovation, scale, and reliable hybrid capabilities.

The company's Productivity and Business Processes segment, which includes Office, Dynamics, LinkedIn and Teams, also performed well, with $16,7 billion in revenue, up 15% year over year. Office 365 commercial revenue grew 22%, driven by strong demand for cloud-based productivity solutions. LinkedIn revenue grew 37%, reflecting the recovery of the online advertising market. Teams, Microsoft's collaboration and communication platform, reached 270 million daily active users, up from 145 million a year ago.

The company's More Personal Computing segment, which includes Windows, Devices, Games and Search, reported $15.400 billion in revenue, a 9% year-over-year increase. Windows revenue grew 10%, benefiting from increased PC demand amid the pandemic. Device revenue grew 16%, driven by the launch of new Surface products and accessories. Gaming revenue grew 16%, driven by strong sales of Xbox Series X and S consoles and Xbox Game Pass subscriptions. Search revenue grew 17%, reflecting the improving online advertising market.

Microsoft CEO Satya Nadella said the company's results reflect its ability to empower customers and partners with cloud and artificial intelligence solutions that enable digital transformation. “We are innovating at every layer of the technology stack to help organizations drive new levels of technology intensity in their businesses,” he said. "Our teams are also creating inclusive solutions that span the real and virtual worlds, creating opportunities for everyone."

Microsoft Chief Financial Officer Amy Hood said the company expects to continue its momentum in the next quarter and beyond. “We are well positioned to capitalize on the growing market opportunity at every layer of the cloud,” she said. “We remain focused on investing in strategic areas to drive long-term growth and profitability.”

It's impressive to see Microsoft's strong financial performance, particularly driven by AI and cloud-related initiatives. Here is a breakdown of the key points from the information you provided:

1. **Financial performance:**

   – Microsoft's net revenue for the first quarter of its fiscal year 2024 was $22.300 billion, a significant increase of 27% compared to the previous year.

   – Overall revenue saw a 13% year-over-year increase, reaching $56.500 billion.

2. **AI Strategy:**

   – Microsoft has been investing heavily in AI, with the launch of ChatGPT for its OpenAI-backed project.

   – The company is implementing its AI strategy across its product portfolio, and the flagship Copilot tool will be integrated into several products.

3. **Productivity and Business Processes:**

   – Revenue in the Productivity and Business Processes category amounted to $18,6 billion, reflecting a 13% year-over-year increase.

   – The expectation is for continued growth in this segment, particularly after the general availability of Copilot starting November 1.

4. **Office and Dynamics:**

   – Office Commercial products and cloud services saw 15% year-over-year revenue growth, driven by substantial 18% growth in Office 365 Commercial revenue.

   – Revenue from Office Consumer products and cloud services increased 3%.

   – Revenue from Dynamics products and cloud services grew 22%, attributed to the 28% revenue growth seen in Dynamics 365 during the quarter.

5. **Smart Cloud:**

   – The Intelligent Cloud segment reported a 19% increase in revenue, reaching $24,3 billion.

   – Azure and other cloud services within this segment recorded a significant 29% growth in revenue.

6. **Comparison with Google Cloud:**

   – Microsoft's cloud-related revenue growth surpassed that of Google Cloud, with an increase of 29% for Azure and other cloud services compared to 22% for Google Cloud, marking the slowest growth in Google Cloud in almost three years.

7. **CEO Perspective:**

   – Microsoft CEO Satya Nadella emphasized the company's commitment to infusing AI into every layer of the technology stack and business processes to drive productivity gains for customers.

This information highlights Microsoft's success in leveraging artificial intelligence and cloud technologies to drive revenue growth in various segments of its business.