Microsoft posts strong quarter as revenue rises 18% to $77.7 billion, net profit jumps 22%

Microsoft has declared its quarterly results, beating expectations with 18 per cent revenue jump to $77.7 billion. The software maker also reported a 22 per cent increase in quarterly profit to $30.8 billion. According to some analysts, Microsoft was expected to earn $3.67 per share on revenue of $75.38 billion. But it earned $77.7 billion, its quarterly results showed.

Microsoft, in a statement, said that the quarterly results did not include the impact of the investment in the artificial intelligence (AI) ChatGPT-maker OpenAI during the period, noting that the adjustment was made to “clarify” how the $3 billion influenced its core business.

The results came a day after a new deal with OpenAI pushed Microsoft to $4 trillion in valuation for the second time this year.

The Microsoft stocks also jumped 4 per cent after it reached $500 billion valuation deal with OpenAI. But then dropped in the hours before it disclosed its earnings as an impact of the Azure outage.

Also Read | Microsoft admits configuration error caused worldwide Azure outage — Are services back?

Driving investor enthusiasm on Tuesday was the announcement of Microsoft's revised business deal with its longtime partner OpenAI, maker of ChatGPT and now the world's most valuable startup.

While no longer OpenAI's exclusive cloud provider, a relationship that helped bankroll the startup's early growth, Microsoft will retain commercial rights to OpenAI products through 2032 and get a roughly 27% stake in OpenAI’s new for-profit arm.

In July, Microsoft’s valuation had crossed $4 trillion, only after Nvidia to reach the milestone. Microsoft again and Apple for the first time crossed $4 trillion this week, while Nvidia went on to achieve a different milestone: the first $5 trillion company. Also Read | Meta’s Q3 profit plunges on $16 billion one-time tax charge related to Trump's Big Beautiful Bill

The sky-high valuations highlight the investor frenzy around artificial intelligence, which some fear could turn into a bust if AI products aren't as transformative or profitable as promised. AI is costly to build and run, and Microsoft said it spent nearly $35 billion in the July-September quarter on capital expenditures to support AI and cloud demand, nearly half of that on computer chips and much of the rest related to data center real estate.

Microsoft's recent focus has centered around pitching its flagship AI assistant Copilot to help with a variety of work tasks, and last week gave it a new animated avatar exterior called Mico.

(With agency inputs)