Microsoft profit jumps as OpenAI lifts earnings, shares fall on AI spend
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The news: Microsoft reported net income of USD38.5 billion ($54.7 billion) for the December quarter, up 60% year-on-year, with a USD7.6 billion increase from its investment in OpenAI following the startup’s October restructuring.
The numbers: Revenue rose 17% to USD81.3 billion, beating expectations of about USD80.27 billion, according to LSEG data.
But shares fell as investors reacted to Microsoft’s record USD37.5 billion in quarterly capital spending, amid concerns it may take longer than expected for AI investments to deliver returns.
Analysts had expected capital expenditures for the period at USD36.2 billion, according to Bloomberg.
Adjusted earnings per share, excluding the OpenAI impact, were USD4.14, also ahead of expectations. Azure and other cloud services revenue rose 39%, while Microsoft Cloud revenue was up 26% at USD51.5 billion.
The company said its commercial remaining performance obligation more than doubled to USD625 billion, supported by OpenAI’s USD250 billion commitment to buy Azure services.
Despite exceeding analyst estimates across revenue, operating income and EPS, shares immediately fell more than 7% in extended trading amid concerns about slowing cloud growth and rising AI competition. Shares had pared back some loses to be down 3.77% at 4:22pm New York time (8:22 AEDT).
What they said: Satya Nadella, chairman and chief executive officer of Microsoft said in a statement, “We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises. We are pushing the frontier across our entire AI stack to drive new value for our customers and partners.”
