Microsoft's Azure cloud revenue surges as AI spending pays off
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Microsoft's Azure cloud-computing business delivered another quarter of blockbuster growth on Wednesday, powering revenue above Wall Street's expectations and showcasing the growing returns on its massive artificial intelligence bets.Shares of the software company rose more than 6% in extended trading after it said Azure sales surpassed $75 billion on an annual basis, the first time it has disclosed that figure. That beat expectations for $74.62 billion.The business still trails market leader Amazon Web Services , which had an earlier start in cloud computing and brought in $107.56 billion in its most recent fiscal year.The results are likely to bolster investor confidence that Big Tech is benefiting from its massive data center buildout, with capital expenditure to reach $330 billion this year.Rival Alphabet's earnings also showed last week that AI spending was rising, but so were the returns, as it beat revenue estimates and lifted its outlay forecast by $10 billion.Microsoft said Azure revenue jumped 39% in the June quarter, more than the analyst average estimate of 34.75%, according to Visible Alpha.Overall revenue rose 18% to $76.4 billion in the April-June period, Microsoft's fiscal fourth quarter. Analysts on average expected $73.81 billion, according to data compiled by LSEG.Capital spending rose 27% to $24.2 billion, compared with estimates of $23.08 billion, per Visible Alpha. Microsoft has said the spending is crucial to overcoming supply constraints that have hampered its ability to meet soaring AI demand.The company has emerged as an early leader in making money from AI thanks to its exclusive access to OpenAI's technology. The tie-up has helped attract scores of businesses to its cloud service and allowed Microsoft to swiftly roll out AI products such as its M365 Copilot AI assistant for enterprises.It has also turned the company into an investor darling that is $200 billion short of becoming only the second company to hit a $4-trillion valuation, with its shares up about 20% this year.But investor doubts have risen about the OpenAI tie-up as the companies renegotiate the deal and the startup shifts some workloads to rivals, including Google and Oracle.Media reports have said that the two are at a deadlock over how much access Microsoft will retain to OpenAI's tech and its stake if OpenAI converts into a public-benefit corporation.Microsoft has tried to reduce its reliance on OpenAI by developing in-house AI technology and broadening its model lineup with partners such as xAI, Meta, and France's Mistral, hosting their models on Azure for clients.
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