Microsoft cloud sales beat expectations amid record AI spending

[WASHINGTON] Microsoft reported better-than-expected growth in its cloud business and said spending on artificial intelligence (AI) infrastructure hit a record.

The closely watched Azure cloud-computing unit posted a 39 per cent rise in sales during Microsoft’s fiscal fourth quarter, the company said on Wednesday (Jul 30). Analysts projected 34 per cent revenue growth.

The company also said that sales at the cloud division grew 34 per cent to more than US$75 billion during the year ended Jun 30, the first time the company has disclosed a revenue figure for Azure, which sells computing power and other services to businesses.

The shares rose about 7 per cent in extended trading after closing at US$513.24 in New York. The company’s stock was up about 22 per cent this year to the Wednesday close.

Microsoft in the last few years, has deployed AI tools, including those powered by ChatGPT maker OpenAI, across its products, betting that conversant chatbots and more powerful automation technology will boost sales of the company’s productivity software and cloud services.

That’s come at a steep cost, as Microsoft races to construct enough data centres to meet surging demand for generative AI training and tools. The Redmond, Washington company’s capital expenditures during the quarter, US$24.2 billion, were a record, up 27 per cent from a year earlier. The company’s largest rivals in cloud services, Amazon.com and Alphabet, have also announced massive expansion plans.

During its earnings report last week, Alphabet said that robust demand for its AI services will require a significant increase in capital spending. Google’s parent company said that 2025 capital expenditures will be US$85 billion, or US$10 billion greater than an earlier forecast.

Amazon is scheduled to report quarterly earnings on Thursday, and investors will be focused its own cloud results and capital spending.

Microsoft’s overall sales rose 18 per cent to US$76.4 billion during the quarter. Net income was US$3.65 a share. Analysts on average estimated US$73.9 billion in revenue and per-share earnings of US$3.37. BLOOMBERG