Microsoft: results exceed expectations thanks to the Azure cloud; shares up 4 per cent in after-hours trading

(Il Sole 24 Ore Radiocor) - Microsoft shares rose by 4 per cent in after-hours trading after the company reported better-than-expected quarterly results, driven by 48 per cent growth in its Azure cloud infrastructure business. Microsoft’s revenue grew by 19 per cent year-on-year to $92.28 billion, compared with the consensus estimate of $90.69 billion, with Azure now its core business. Microsoft’s net profit rose to $36.63 billion, or $4.92 per share, compared with $27.75 billion, or $3.72 per share, a year ago. Adjusted earnings exclude a loss of approximately $200 million on the investment in OpenAI and stood at $4.89 per share, compared with the consensus estimate of $4.73. The software giant has rapidly expanded its data centre infrastructure to meet demand for artificial intelligence, whilst maintaining a positive free cash flow, unlike its competitors in the hyperscale sector. Microsoft reported capital expenditure and finance leases of $45.2 billion for the quarter, up by around 30 per cent on the previous year. Analysts surveyed by StreetAccount had forecast $50.67 billion. Around 75 per cent of capital expenditure is now linked to short-term assets such as Intel chips and Nvidia graphics processing units, compared with around 66 per cent over the last three quarters. This shift indicates the priority Microsoft is placing on infrastructure. Free cash flow fell by 27 per cent to $18.63 billion. Cloud rival Alphabet reported a negative free cash flow of over $9 billion for the quarter, after Meta announced last week that its cash flow had turned negative for the first time. For the first time, Microsoft disclosed revenue from its Azure cloud service, which totalled $33.17 billion for the quarter. Analysts surveyed by StreetAccount had expected $32.32 billion.

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