Microsoft Q3 results beat expectations as cloud stays afloat

satya nadella, microsoft ceo | microsoft Q3 results

The latest fiscal announcement from Microsoft revealed that its quarter three financial results have exceeded investor expectations, with a revenue rise of seven percent reported at $52.9bn, against an anticipated $51.1bn, and a ten percent rise in earnings per share (EPS) to $2.45, against $2.23.

Operating income increased ten percent to $22.4bn. Microsoft Cloud revenue was $28.5bn and grew 22 percent, slightly ahead of expectations.

Across all business segments, Microsoft’s results conquered investor expectations; productivity and business processes reported $17.5bn against $17.1bn, intelligent cloud $22.1bn to $21.9bn and personal computing revealed $13.1bn against $12.3bn.

Azure and other cloud services reported growth of 27 percent, year-on-year, for the quarter; however, that number has been on the decline since Q3 2022, reflecting companies trimming their investment and expenditure amidst rising interest rates and uncertainties.

Nonetheless, Microsoft’s Azure Arc customers have increased 150 percent YoY, with IKEA Retail, ING Bank, Rabobank, Telstra and Wolverine Worldwide all using the software. Microsoft’s Azure OpenAI Service customers have grown ten times quarter-on-quarter too, now reaching 2,500 firms including Coursera, Grammarly, Mercedes-Benz and Shell.

Significant investments from Microsoft across the quarter included a multi-billion dollar stake in the ChatGPT developer OpenAI and subsequent integrations of the technology within Edge browser, Bing search engine, Microsoft 365 productivity software and cybersecurity offerings. Thus far too, over 200 million images have been created to date by Dall-E.

Since making Copilot for Business more broadly available earlier this year, over 10,000 organizations have signed up, including the likes of Coca-Cola and GM, as well as Duolingo and Mercado Libre. User numbers are increasing for Microsoft elsewhere too, with a 50 percent increase YoY in Power Platform users to 33 million monthly active users, Teams reaching 300 million users this quarter and LinkedIn seeing a 73 percent YoY increase as Gen Z enters the workforce.

Microsoft shares rose four percent in the wake of the announcement of another profitable quarter.

Satya Nadella, chairman and chief executive officer of Microsoft, welcomed the results and cited three focus areas for the organization. “First, helping customers use the breadth and depth of the Microsoft Cloud to get the most value out of their digital spend. Second, investing to lead in the new AI wave across our solution areas and expanding our TAM. Third, driving operating leverage, aligning our cost structure with our revenue growth, he said.

Nadella also leaned into the next generation of technology in computing in a nod to Microsoft’s dominance of the cloud wars with Amazon.

“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,” he said. “Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”

Amy Hood, chief financial officer at Microsoft gave an additional mention to the partner network. “Our results exceeded expectations, driven by focused execution from our sales teams and partners,” she said.