After reporting fiscal first-quarter earnings and revenue projections that above Wall Street expectations, Microsoft shares rose up to 6% in extended trading on Tuesday. The company's earnings increased due to decreased operating expenditure increases.
On a conference call with analysts, Microsoft finance head Amy Hood guided for fiscal second-quarter sales of $60.4 billion to $61.4 billion. Yes, 15% increase. Refinitiv analysts predicted $60.9 billion in sales.
Azure revenue rose 29% in the quarter, above the 26% forecast of CNBC and StreetAccount analysts. Azure revenue is not disclosed in dollars. Azure sales climbed 28% at constant currency, up from 27% in Q4.
Hood expects Azure growth at constant currency to stay consistent at 26% to 27% in the second half of the 2024 fiscal year, with artificial intelligence contributing more.
In the earnings announcement, CEO Satya Nadella said Microsoft is “still helping customers use the Microsoft Cloud to get the most value out of their digital spend, and driving operating leverage.” Hood said clients are still saving money on cloud expenditures, a pattern numerous big cloud infrastructure providers have seen in recent quarters.
Clients are flocking to cloud-based generative AI tools improved with OpenAI software from Microsoft-backed firm. The Azure OpenAI Service has 18,000 clients, up from 11,000 in July. Hood stated Azure GPU capacity increased growth.
“Looking on a competitive basis, we feel good about our execution, taking share, and consistent trends,” Hood added. She added Azure's AI contribution at constant currency in the second half of the fiscal year should match fiscal second quarter performance.
Productivity and Business Processes sales rose 13% to $18.59 billion, above StreetAccount's $18.19 billion forecast. Microsoft 365, LinkedIn, and Dynamics are in the unit. Nadella told investors on a conference call that Teams had over 320 million monthly active users, up from 300 million six months earlier.
Hood was apprehensive about the income boost from the Microsoft 365 Copilot AI add-on for productivity software subscriptions, which will launch Nov. 1 for large enterprises at $30 per person per month. The business anticipates “related revenue to grow gradually over time.”
The More Personal Computing segment—Windows, Xbox, Bing, and Surface—earned $13.67 billion. It rose 3% over the $12.85 billion StreetAccount consensus.