Microsoft invests a record $30 billion in AI, Azure sales explode.
Microsoft plans to spend $30 billion on AI this quarter, Azure achieved $75 billion in revenue, exceeding expectations, and its stock rose 9% thanks to AI investments.
Microsoft (MSFT.O) on Wednesday forecast record capital expenditures of $30 billion for the current first fiscal quarter. This forecast comes after booming sales of its Azure cloud computing business showed increasing returns from major investments in artificial intelligence.
Shares of the software company rose 9% in extended trading after the company announced Azure sales exceeded $75 billion annually, the first time the company has disclosed such a figure, surpassing expectations of $74.62 billion.
Microsoft is outspending its competitors on AI. Google plans to spend $85 billion, while Meta forecasts revenue growth with slightly higher costs. The combined capital spending of the three tech giants is projected to reach $330 billion this year. The results from Microsoft and Meta have boosted AI stocks by $500 billion in value.
Amy Hood, Microsoft's Chief Financial Officer, shared in an online meeting with investors: "I am very pleased that the spending we are making is directly related to the contracts we have signed and the transactions we need to complete."
Although Microsoft's cloud business still lags behind Amazon Web Services (AMZN.O) – which generated $107.56 billion in the most recent fiscal year – investors believe Microsoft's new revenue figures show that investments are translating into increased sales.
Dave Wagner, a portfolio manager at Aptus Capital Advisors who holds Microsoft stock, commented: "Microsoft announcing that figure really demonstrates the massive investments they've made."
Last week's earnings results from rival Alphabet (GOOGL.O) also showed that spending on AI is increasing, along with rising profits, as they exceeded revenue estimates and raised their spending forecast by an additional $10 billion.
Microsoft reported that Azure revenue increased 39% in the sixth quarter, exceeding analysts' average estimate of 34.75%, according to Visible Alpha. The company projected 37% growth for the current quarter, surpassing analysts' 33.5% estimate.
Microsoft said the spending was crucial to addressing supply constraints that have hampered its ability to meet soaring AI demand. The estimated $30 billion investment for the first fiscal quarter exceeded analysts' expectations of $23.75 billion.
In the fourth fiscal quarter that just ended, capital spending increased 27% to $24.2 billion, compared with an estimated $23.08 billion.
Microsoft also announced that its AI tool, Copilot, has surpassed 100 million monthly active users, marking the first time the company has provided this figure. Google, meanwhile, announced that its competitor Gemini has 450 million active users.
Microsoft's total revenue increased 18% to $76.4 billion in the April-June period, its fourth fiscal quarter. Analysts had averaged expectations of $73.81 billion.
