Microsoft Corp has announced its financial results for the October-December quarter, showcasing its profit increase of 10% year-over-year, largely attributed to significant investments in artificial intelligence (AI) technology. The company's net income reached $24.1 billion, equaling $3.23 per share, which surpassed Wall Street expectations of $3.11 per share. Microsoft’s revenue for the quarter amounted to $69.6 billion, representing a 12% increase compared to the previous year and exceeding analyst forecasts.
Despite impressive overall results, Microsoft faced challenges with its cloud computing segment, which is pivotal to its AI strategy. The cloud-focused business generated $25.5 billion, up 19% from the same period last year, yet it fell short of the expected $25.83 billion. This slight miss has raised concerns about Microsoft’s competitiveness within the booming AI sector, primarily as it expands offerings like the Copilot AI chatbot.
According to experts polled by FactSet Research, Microsoft was projected to deliver $68.87 billion for this quarter, reflecting strong market confidence amid growing AI investments. The company's productivity business, which encompasses its Office suite, also showed healthy growth, climbing 14% to reach $29.4 billion. Meanwhile, the personal computing division maintained stability, generating $14.7 billion, benefiting slightly from increased advertising revenues tied to the Bing search engine, even as consumer device sales dipped.
After releasing its earnings, Microsoft shares experienced a 5% decline during after-hours trading, which analysts attributed to market volatility following the introduction of new competitors, particularly the Chinese AI startup DeepSeek. This company has captured attention for claiming to advance AI capabilities at lower costs than its established US rivals, causing apprehension within the tech community.
Reacting to these developments, Microsoft CEO Satya Nadella addressed investor concerns during the earnings call, downplaying the potential impact of DeepSeek’s innovations. He noted, “DeepSeek had some real innovations,” explaining how efficiency gains and competitive pricing could broaden the adoption of AI solutions across industries and enable the creation of additional applications.
Nadella emphasized Microsoft’s financial commitment to advancing its AI cloud services, announcing plans to invest approximately $80 billion this year to create and maintain energy-efficient data centers equipped with specialized chips to support AI operations. “We have more than doubled our overall data centre capacity in the last three years,” he remarked, highlighting the company’s dedication to scaling its infrastructure more than at any other point in its history.
Despite concerns related to decreased cloud revenue, analysts remain confident about Microsoft’s long-term position within the AI market due to its well-established partnerships, particularly with OpenAI, the developer behind the widely popular ChatGPT. Microsoft has already integrated DeepSeek’s latest AI model to bolster its Azure cloud offerings, reinforcing its aim to remain at the forefront of AI advancements.
Concluding his remarks, Nadella reiterated the significance of competition within the AI sector, emphasizing how it stimulates growth and innovation. While market fluctuations and the emergence of DeepSeek create uncertainty, Microsoft’s diverse strategies and continued investments signal its commitment to leading the AI revolution as it maneuvers through this rapidly-evolving technology space.