Microsoft rises premarket as cloud strength drives earnings beat

Investing.com - Microsoft posted quarterly top- and bottom-line results that topped expectations, as continued strength in its cloud unit helped keep concerns over artificial intelligence spending at bay, sending shares of the company climbed more than 3% premarket trading.

"The all-important Azure growth rate beat expectations, signifying [Microsoft]’s AI monetization efforts have progressed well. This could potentially fuel other areas of the AI trade but certainly is the large driver of the positive post market move we are seeing," said Ryan Lee, Senior Vice President of Product and Strategy at Direxion.

The software giant’s results come at a time when spending on AI has been under intense scrutiny. Concerns have soared over the billions of dollars being poured into the combined hardware and software stack needed to handle massive data and computing power used to build and train AI systems. Worries have particularly increased about the huge amounts of debt being issued by companies to fund these AI infrastructure buildouts.

Microsoft gained an early foothold in the AI industry boom after investing in ChatGPT-maker OpenAI. It has since expanded its own AI product portfolio by developing its own models, diversifying its cloud infrastructure, launching AI agents, and integrating AI into its core products.

The world’s third-largest company by market capitalization has become a so-called AI hyperscaler, investing heavily in building and operating large-scale data centers. Other AI hyperscalers include Meta Platforms, Alphabet, Amazon, and Oracle. Last quarter, Microsoft was the only one to not raise capital expenditure forecasts.

Earnings per share came in $4.89 on revenue of $92.28 billion for its fiscal first quarter. Analysts had expected a profit of $4.72 per share on revenue of $90.61 billion. Even as AI takes over the spotlight, the growth engine for Microsoft remains its Azure cloud computing services business. Azure surpassed $100 billion in revenue in Microsoft’s fiscal year 2026.

Azure revenue jumped 48% Y/Y, helping overall Microsoft Cloud revenue improve 31% Y/Y in constant currency to $63.9 billion.

“We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack. By helping organizations build and own their own intelligence, and earning trust through agent safety and security, we are translating our innovation into growing adoption and real-world impact across every industry,” Microsoft CEO Satya Nadella said in a statement.

"Azure revenues are up more than expected and capex was significantly lower than expected. That led to an EPS beat. We’re still awaiting concrete guidance about next quarter and beyond, but there is certainly enough here for investors to be encouraged," Steve Sosnick, chief strategist at Interactive Brokers, told Investing.com.

Original Article

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