Microsoft Corp on Wednesday reported profits of US$24.1 billion in the recently ended quarter, but shares slid on worries over its vital cloud computing business.
Revenue grew 12 percent year-on-year to US$69.6 billion and the amount of money taken in by its “intelligence cloud” unit including its flagship Azure computing platform climbed 19 percent from the same time last year to US$25.5 billion, but the market had expected more.
Microsoft’s productivity business segment, which includes its Office suite of e-mail and other workplace products, saw sales grow 14 percent to US$29.4 billion.
Photo: Bloomberg
Its personal computing business, led by its Windows division, remained steady at US$14.7 billion, with a drop in consumer device sales offset by growth in advertising revenue tied to the Bing search engine.
Microsoft shares dropped 5 percent in after-hours trading on Wednesday, but were still higher than on Monday, when the tech giant was hit by a broader tech stock sale caused by a frenzy over the new ChatGPT competitor developed by Chinese artificial intelligence (AI) start-up DeepSeek (深度求索).
“Microsoft had a fine quarter, but ‘fine’ isn’t what investors want from an AI juggernaut spending like it’s building the Death Star,” Emarketer principal analyst Jeremy Goldman said, referring to a planet-sized space station from the Star Wars films.
“The cloud is still a growth engine, but AI competition — especially from unexpected players like DeepSeek — is real,” Goldman said.
Microsoft chief executive Satya Nadella spotlighted the tech titan’s AI investments, saying the company is “innovating across our tech stack” to unlock the ability for customers to make money from the technology.
Nadella said Microsoft’s AI business is on pace to bring in more than US$13 billion annually, in a near tripling of the rate a year earlier.
The Redmond-based company has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT.
The company has rolled out AI features at a furious pace, mainly under its Copilot brand, leaving investors hopeful for a return on investment from the expensive technology.
The company is on track to pump about US$80 billion into AI this fiscal year, Microsoft president Brad Smith wrote in an online post.
Smith contended AI is poised to transform all aspects of life, and it is imperative that the US be the global leader when it comes to the technology, he said.
While DeepSeek said that it was catching up to US tech titans on a fraction of their budget, Nadella downplayed such concerns on an investor call on Wednesday, saying “DeepSeek had some real innovations” and it is good to have efficiency gains and lower prices in AI development because it “means people can consume more and there’ll be more apps written.”
Microsoft also added DeepSeek’s latest AI model to those available on its Azure computing platform on Wednesday.
Additional reporting by AP
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