SAN FRANCISCO (AP) — Microsoft Corp said Tuesday that profit for the October-December quarter soared 33 per cent, powered by its significant investments in artificial intelligence technology. The company said that increase largely reflected growth in the company’s cloud-computing unit, where Microsoft focuses most of its AI investments.
The company reported net income for the quarter of USD21.87 billion, or USD2.93 per diluted share, beating Wall Street expectations of USD2.79 per share. The Redmond, Washington-based software maker posted revenue of USD62.02 billion in the quarter, up 18 per cent from USD52.75 billion the previous year, also beating expectations.
“Microsoft is firmly establishing itself as a frontrunner in the AI race,” said Jeremy Goldman, director of briefings at Insider Intelligence. In addition to other benefits, Goldman suggested that AI technology could help expand Microsoft’s share of digital advertising. His firm anticipates that Microsoft’s worldwide ad revenues will grow 12 per cent this year to USD14.93 billion, but also notes that Google is expected to expand its much larger ad business by 10 per cent in the same period.
Analysts polled by FactSet Research expected Microsoft to generate revenue of USD61.14 billion, and currently project revenue of USD60.97 billion for the January-March quarter. The results are the first to incorporate the finances of video-game maker Activision Blizzard, which Microsoft formally acquired on Oct 13 for USD69 billion.
That merger boosted Microsoft’s revenue growth by four points, according to James Ambrose, the company’s director of investor relations. But it also shaved operating profits by roughly USD440 million as a result of purchase accounting adjustments and integration and transactions costs, he said.
Microsoft shares dropped in after-hours trading, falling almost two per cent to USD400.86.
Microsoft’s cloud-focused business segment outgrew its other divisions, with revenue expanding 20 per cent from the same time last year to USD25.9 billion for the quarter.
Revenue from the company’s Office suite of email and other workplace products, plus the LinkedIn professional social network, grew 13 per cent to USD19.2 billion for the quarter.
And the Windows-led personal computing business, which includes the company’s Xbox video games and services, grew 19 per cent to USD16.9 billion. Those figures reflected the huge impact of adding Activision Blizzard to the segment. Microsoft’s Xbox-related revenues grew by 61 per cent in the quarter, although the company attributed 55 points of that figure to the addition of Activision, known for producing the enormously successful Call of Duty series of games.
