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Business News/ Companies / Company Results/  Microsoft Q3 Results: Revenues rise 13% to $56.5 billion, beating analysts estimates
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Microsoft Q3 Results: Revenues rise 13% to $56.5 billion, beating analysts estimates

Silicon Valley tech giant Microsoft has beat Wall Street estimates in all segments. The company's forecast is also ahead of analysts' targets.

File Image: Satya Nadella, CEO of Microsoft Corp., speaks during a keynote session (Photographer: Andrew Harrer/Bloomberg)Premium
File Image: Satya Nadella, CEO of Microsoft Corp., speaks during a keynote session (Photographer: Andrew Harrer/Bloomberg)

Silicon Valley tech giant Microsoft has recorded a 13 percent rise in revenues to $56.5 billion in the third quarter (Q3), Reuters reported on October 25. Data from LSEG showed this is higher than the $54.52 billion estimated by analysts, it added.

Capital expenditures were $11.2 billion, up from $10.7 billion in the previous quarter. This is the biggest spend since at least FY16 and executives say is only going to increase each quarter this fiscal.

Microsoft shares were up 3 percent in after-hours trading.

The report also notes that the tech major has beat Wall Street estimates in all segments. The company's forecast is also ahead of analysts' targets.

Microsoft said Q3 profit was $2.99 per share, above analyst estimates of $2.65 per share, according to LSEG data.

Breakdown of Segment Earnings 

Among segments, Microsoft's Intelligent Cloud unit recorded revenues of $24.3 billion, beating estimates of $23.49 billion. Its brand Azure in fact rose 29 percent, against estimated 26.2 percent, the report added. Azure is the platform that will feature much of Microsoft's artificial intelligence (AI) solutions.

According to Brett Iversen, Microsoft's vice president for investor relations, consumer anticipation of AI services has been key factor in quarterly sales growth for the cloud business.

Windows operating system and other products in the segment saw sales increase to $13.7 billion, against expectations of $12.82 billion. While the business segment saw $18.20 billion growth.

Most of the company's segments, from PC to cloud computing beat estimates, with a few exceptions such as advertising revenue. 

AI in focus

Most of Microsoft's products with OpenAI, are yet to be launched. However, corporate buyers have shown much enthusiasm for AI solutions born out of collaboration with the ChatGPT creator. 

"The results indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth," said Jesse Cohen, senior analyst at Investing.com.

"What AI is doing ... is opening up either new conversations or extending existing conversations or getting us back in touch with customers that we maybe weren't doing as much with," Iversen told Reuters.

Bob O'Donnell, chief analyst at TECHnalysis Research told the agency that Microsoft's :strong messaging" on AI has had and impact amd the trend shows that Azure is gaining market share against competitors. 

Copilot, the company's $30/month tool for a small number of Microsoft 365 customers as part of a pilot project, is also generating interest, the report said. Copilot summarises a day's worth of emails into a quick update and will be commercially available in November, it added. 

Users who opt for Copilot will have to upgrade various Microsoft-based systems to use the tool. 

Company Forecasts

Microsoft has forecast an estimated growth rate of 26-27 percent for Azure, against analysts expectation of 25.1 percent; and revenue forecast of $25.1-25.4 billion for the cloud segment against estimates of $24.94 billion, it said.

For the Windows segment, the company forecast of $16.5-16.9 billion beats estimates of $14.52 billion. Notably, Microsoft's forecast includes acquisition of Activision, while it is not clear if analysts' numbers do. 

Sales are forecat to be between $18.8-19.1 billion for the business segment which includes LinkedIn and office productivity services. Analysts expectation here is $18.83 billion. 

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Published: 25 Oct 2023, 07:07 AM IST
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