Microsoft's annual cloud revenue exceeds expectations, hits $75 amid AI focus
The Azure cloud business is a centerpiece of Microsoft's efforts to shift its focus to artificial intelligence, but until Wednesday the company hadn't disclosed how much money it makes.
The revelation came in the software giant's end-of-year earnings report, one that also showed a 24% spike in the company's quarterly profit that beat Wall Street expectations and pleased investors wary about Microsoft's ongoing construction of costly new data centers needed to meet cloud computing and AI demand.
'We continue to scale our own data center capacity faster than any other competitor,' CEO Satya Nadella said on an investor call, boasting that the company now has more than 400 of the sprawling facilities across six continents.
Also read: Microsoft to lay off 9,000 workers in second wave of major job cuts
Microsoft's fiscal fourth-quarter profit was $34.3 billion, or $3.65 per share, beating analyst expectations for $3.37 per share. It posted revenue of $76.4 billion in the April-June period, up 18% from last year. Analysts polled by FactSet Research had been looking for revenue of $73.86 billion.
Microsoft launched Azure more than a decade ago, but the service has increasingly become intertwined with its AI ambitions, as the company looks to sell its AI chatbot and other tools to big business customers that are also reliant on its core online services.
It still trails behind its lead competitor, Amazon Web Services, which reported $107.6 billion in revenue for its fiscal year that ended in December.
Building the infrastructure to power cloud and AI technology is expensive, and Microsoft has looked for savings elsewhere. It announced layoffs of about 15,000 workers this year even as its profits have soared.
Nadella told employees last week the layoffs were 'weighing heavily' on him but also positioned them as an opportunity to reimagine the company's mission for an AI era.
Still, the overall workforce numbers haven't changed. The company said it employed 228,000 full-time employees as of June 30, the exact same amount it reported a year ago, though slightly more of them are now U.S.-based and fewer of them are in product support roles or consulting services.
Promises of a leaner approach have been welcomed on Wall Street, especially as Microsoft and other tech giants are trying to justify huge amounts of capital spending to pay for the data centers, chips and other components required to power AI technology.
Google said after releasing its earnings last week it would raise its budget for capital expenditures by an additional $10 billion to $85 billion. Microsoft's chief financial officer, Amy Hood, said she expects capital spending for the July-September quarter to be $30 billion.
Microsoft didn't disclose Wednesday to what extent sweeping U.S. tariffs are affecting its revenue, but its annual report lists tariffs among a number of risks the company faces.
'Increased geopolitical instabilities and changing U.S. administration priorities create an unpredictable trade landscape,' the company said. It also said the "volatility of U.S. tariffs has triggered economic uncertainty and could impact cloud and devices supply chain cost competitiveness."
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