Microsoft (MS) reported results that exceeded market expectations for the first quarter (January to March) of this year, causing its stock to rise nearly 7% in after-hours transactions.
MS reported a revenue of $70.07 billion (approximately 99.85 trillion won) and a net income of $3.46 per share (approximately 4,900 won) on the 30th (local time). This performance surpassed the average revenue estimate of Wall Street analysts compiled by market research firm LSGE, which was $68.42 billion, and net income of $3.22 per share.
Revenue increased by 13% compared to the same period last year, while net income grew to $25.8 billion (approximately 37 trillion won), an increase of 18% year-on-year.
Revenue from the productivity and business processes institutional sector, which includes office software subscriptions and LinkedIn, reached $29.94 billion, marking a 10% increase. This figure exceeded the market average estimate of $29.57 billion.
Revenue from the intelligent cloud institutional sector, which includes the cloud service Azure, grew by 21% to $26.75 billion, surpassing market expectations of $26.16 billion. Notably, Azure revenue increased by 33%, exceeding the estimated growth of 30.3% surveyed by StreetAccount. MS explained that about half of this growth (16 percentage points) is attributed to artificial intelligence (AI).
Revenue from the personal computing institutional sector, which includes Windows, search advertising, devices, and video game consoles, rose by 6% to $13.37 billion, exceeding the expected figure of $12.66 billion.
Satya Nadella, MS's Chief Executive Officer (CEO), noted during a conference call following the earnings announcement that there has been an acceleration in demand across all sectors for cloud services, stating that various corporations are expanding their bases on Azure.
According to Bloomberg, the capital expenditure recognized for MS's data centers totaled $21.4 billion, marking the first decline in over two years.
Amy Hood, MS's Chief Financial Officer (CFO), indicated that capital expenditure will continue to rise in the new fiscal year starting in July, but the pace is expected to slow. She added, 'We're increasing our data center capacity in the AI services institutional sector as planned, but demand is growing a bit more quickly. Therefore, we anticipate some constraints on AI capacity after June.'
This performance did not account for the impact of President Donald Trump's tariff policies. Trump announced reciprocal tariffs on major trading partners earlier this month.
Nadella CEO refrained from commenting on the impact of the tariff policy on business but mentioned that it could actually be leveraged as a business opportunity. In response to related questions, he said, 'If you agree with the assertion that software can be the most flexible resource to achieve more with fewer resources in response to pressures like inflation, we can be very helpful in that regard.'
On that day, MS announced that it adjusted its partnership with OpenAI, the developer of ChatGPT, a key AI partner in the first quarter. MS explained that while OpenAI has the exclusive right to negotiate when it requires new computing capacity, MS is not obligated to always provide it.
OpenAI announced the Stargate AI infrastructure project, in which it will invest $50 billion in the U.S. over the next four years, alongside Oracle, a U.S. software and cloud corporation, and SoftBank, a Japanese corporation, this past January.
Following the earnings announcement that day, MS's stock surged by 6.93% in after-hours transactions.