Microsoft (MSFT) reported third-quarter results after the bell Wednesday, beating analyst expectations on top and bottom lines, and said its AI business now has an annual revenue run rate of $37 billion, up 123% year-over-year.
Microsoft’s stock price has fallen about 20% in the past six months on concerns about Azure’s computing power and AI growth.
Microsoft’s earnings per share (EPS) for the quarter was $4.27 on revenue of $82.89 billion. Based on Bloomberg analyst consensus estimates, Wall Street had expected EPS of $4.04 and revenue of $81.46 billion.
Microsoft says its Copilot service now has more than 20 million paid seats, exceeding the 15 million it reported in the second quarter.
It also said its remaining performance obligations were $627 billion, an increase of 99% from last year, with a weighted average term of 2.5 years. Excluding OpenAI, RPO increased by approximately 26%, which is roughly in line with the season average.
In terms of capital expenditures, Microsoft said it spent $31.9 billion, with two-thirds of that going toward assets such as GPUs and CPUs.
Microsoft had EPS of $3.46 and revenue of $70.06 billion in the year-ago period.
The company’s Productivity and Business Processes segment reported revenue of $34.7 billion, slightly above expectations of $34.48 billion, and its Intelligent Cloud business reported revenue of $34.68 billion. Wall Street was seeking $34.31 billion.
Ahead of its earnings call, Microsoft on Monday provided Wall Street with an update on its most high-profile AI connections, reworking its contract with OpenAI (OPAI.PVT) and saying it will no longer have to make revenue-sharing payments to the AI startup, but that OpenAI will continue to make payments to Microsoft.
But the tech giant also lost exclusive access to OpenAI’s intellectual property and AI models. OpenAI will still have access, but you can also share your data with other companies. OpenAI will now be able to offer its products across cloud partners, not just Azure.
In the PC segment, Microsoft’s More Personal Computing division had revenue of $13.2 billion, compared to expectations of $12.64 billion.
The PC industry is grappling with the effects of a global memory shortage caused by the proliferation of data centers worldwide.
This has forced some manufacturers to raise the price of PCs or discontinue certain low-end models, leading to a decline in overall sales. According to the International Data Corporation, global PC shipments are expected to decline by 11.3% this year.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X @Daniel Howley.
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