Microsoft Net Income Up 9% In 3rd Quarter Driven By Cloud Strength

Software Giant Backing ChatGPT, Microsoft posted a growth of 9% in net income for the quarter ended March 31, 2023, as against to the corresponding period of last fiscal year. The net income of $18.3 billion, or earnings of $2.45 per share, has risen from $16.73 billion, or $2.22 per share, a year ago due to the cloud strength, with inputs from CNBC.

In terms of constant currency, net income was up by 14% as per the statement release by the company on Tuesday. Microsoft finance chief Amy Hood announced the increase in revenue from $54.85 billion to $55.85 billion, during a conference call with analysts. The middle of the range, at $55.35 billion, implies 6.7% growth, topping the $54.84 billion consensus among analysts surveyed by Refinitiv.

Hood is bullish on artificial intelligence. "As with any significant platform shift, it starts with innovation, and we're excited about the early feedback and demand signals from the AI capabilities we've announced to date," she said. "We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time."

As per the statement released, revenue increased 7% to $52.86 billion from $49.36 billion a year ago. Maximum revenue contribution was from Azure and other cloud services growth of 27%, compared with 31% in the prior quarter. It was within the estimates of CNBC's analysts poll of 26.5% growth and StreetAccount suggestion of 27.2%.

The Productivity and Business Process segment containing Dynamics, LinkedIn and Office, posted $17.52 billion in revenue, up about 11% and above the StreetAccount consensus of $17.05 billion. Microsoft said growth in revenue per user helped the company achieve 14% more revenue from commercial Office 365 productivity software subscriptions.

The Teams communication app had over 300 million monthly active users in the quarter, CEO Satya Nadella said. That's up from 280 million in the previous quarter.

The More Personal Computing segment, featuring Bing, Windows, Surface and Xbox, delivered $13.26 billion in revenue, down 9% but more than the $12.25 billion StreetAccount consensus. Bing now has over 100 million daily active users, and revenue from gaming subscriptions approached $1 billion, Nadella said.

Sales of Windows operating-system licenses to device makers declined some 28%, with higher channel inventory levels hurting results. Research firm Gartner estimated that PC shipments declined 30%. But demand for PCs was somewhat better than management had expected, Hood said.

During the quarter Microsoft announced a new multibillion-dollar investment in OpenAI and said it would draw on the company's artificial intelligence models for a new version of its Bing search engine and enhancements to the Microsoft 365 productivity software.

Nadella further added, "The world's most advanced AI models are coming together with the world's most universal user interface - natural language - to create a new era of computing. We feel we have a good lead and we have a differentiated offering up and down the stack.

The stock price of Microsoft rallied by nearly 15% over a year on Tuesday's trade excluding after hours movement.