Microsoft announced an aggressive investment plan on Tuesday to match demand for its new artificial intelligence services after exceeding Wall Street revenue and profit projections for the fiscal fourth quarter.Costs surged dramatically as Microsoft built new data centers to support AI, and on a conference call with analysts, Chief Financial Officer Amy Hood warned the …
Microsoft announced an aggressive investment plan on Tuesday to match demand for its new artificial intelligence services after exceeding Wall Street revenue and profit projections for the fiscal fourth quarter.
Costs surged dramatically as Microsoft built new data centers to support AI, and on a conference call with analysts, Chief Financial Officer Amy Hood warned the company’s capital expenditures will continue to rise each quarter through fiscal 2024.
Wall Street is interested in how generative AI services can help Microsoft, which took an early lead by investing in OpenAI, the owner of the popular ChatGPT service.
As a result, Microsoft is incorporating artificial intelligence into its own products, such as the $30-per-month “Copilot” assistant for its Microsoft 365 service, which can summarize a day’s worth of emails into a brief update. It also intends to sell cloud computing capabilities that will be used by other companies to construct AI services.
Microsoft does not provide a specific quarterly sales figure for Azure, the component of its business best positioned to profit on the growing interest in artificial intelligence. However, on a conference call, CEO Satya Nadella stated that Azure accounted for more than half of the $110 billion for “Microsoft Cloud” in fiscal 2023, putting Azure sales at $55 billion or higher and revealing the size of the business for the first time.
The company is still managing a PC business slowdown, with sales of its Windows operating system, among other things, falling to $13.9 billion. Sales in the LinkedIn social network and Office productivity software category grew to $18.3 billion. According to Refinitiv statistics, both segments marginally outperformed the average analyst expectation.
Capital expenditures increased to $10.7 billion in the fiscal third quarter, up from $7.8 billion in the previous quarter, after the business told investors that spending would increase as it built out data centers for AI development.
Microsoft has begun to integrate AI capability into its products, including Azure, Microsoft 365, GitHub, and a number of developer tools.
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