Even though Microsoft executives spoke about AI frequently during the company’s conference call on Tuesday, the fundamentals of business computing were actually what helped the company post better than anticipated quarterly results.
The company’s performance in the AI race may well decide Microsoft’s long-term prospects, but the ups and downs of corporate technology investment are likely to be the main economic driver determining its short-term course.
AI is a driving force for Microsoft in the long run rather than short-term profit
On Tuesday, Microsoft outperformed forecasts for quarterly revenue and profitability, helped by ongoing cloud computing growth and a PC market that, while slow, wasn’t quite as awful as expected.
In addition, AI was the watchword from both CEO Satya Nadella and CFO Amy Hood, who used the term frequently as they addressed each of Microsoft’s businesses, from Azure to Teams to LinkedIn, despite not being the present business’s main driver.
“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,” says chairman and chief executive officer of Microsoft Satya Nadella. “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.”
Adding to him, executive vice president and chief financial officer of Microsoft Amy Hood explains that “focused execution by our sales teams and partners in this dynamic environment resulted in Microsoft Cloud revenue of $28.5 billion, up 22% (up 25% in constant currency) year-over-year”.
Here are some key values from Microsoft’s quarterly report.
- Microsoft Cloud revenue increased by 22% to $28.5 billion.
- However, PC-related businesses were severely impacted, with sales from the devices division, which includes Surface, down 30% and Windows revenue from computer makers down 28%.
- According to the firm, AI will contribute roughly 1% of Microsoft’s anticipated 26%-to-27% growth in Azure this quarter.
- Furthermore, Hood and Nadella affirmed that Microsoft anticipates being able to charge for the AI-assisted copilots it is integrating into a number of products, including Office programs like Word, Excel, and PowerPoint.
Although pricing hasn’t been disclosed by Microsoft, the executives cited GitHub Copilot as an example of what would be possible to charge. The monthly list price for GitHub Copilot is $10 for private users and $19 for commercial users. The company acknowledged that costs will increase as the business added infrastructure to provide new AI services, like OpenAI, to itself and its clients.
To zoom away, it is not just Microsoft talking about AI these days. This year, the number of earnings calls mentioning the technology has increased. On its investor call, Google (Alphabet), which also reported earnings on Tuesday, hammered home the AI point.
The company’s Bard and PALM initiatives were praised by CEO Sundar Pichai, who also pledged a “thoughtful and deliberate” approach to implementing the cutting-edge technologies.
However, Google hasn’t been able to compete with Microsoft in the race for AI yet. In fact, it faces $57B loss amid Microsoft AI rivalry.
According to sources, Google has come under fire internally for allegedly pushing Bard to market even though internal reports indicated it wasn’t quite ready for distribution. Nevertheless, the business outperformed analysts’ forecasts overall, with Google Cloud revenue continuing to expand but total ad revenue slightly declining for the second consecutive quarter.
Nonetheless, Microsoft claims to be the leading company regarding the intensified race on AI technologies, and seems like this claim is quite founded. If you would like to take a closer look on Microsoft’s latest efforts on its AI projects, it has a dedicated page on its website explaining them.
