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Investing.com -- Microsoft (NASDAQ:MSFT) shares rose by more than 4% in early U.S. trading on Thursday after the software giant reported quarterly results that beat Wall Street expectations, driven by continued growth at its artificial intelligence-enhanced flagship cloud business.
Fiscal fourth-quarter revenue at the unit, known as Azure, jumped by 39% versus a year earlier, outpacing expectations and fueling group-wide sales of $76.4 billion.
On a net basis, overall profit came in at $27.2 billion, or $3.65 per diluted share -- also surpassing estimates.
For Microsoft’s entire fiscal year, Azure generated over $75 billion in revenue, growing 34% annually, CEO Satya Nadella highlighted in a statement. Nadella said Azure’s growth was fueled by “demand across every industry and sector” as companies increasingly adopt AI-driven tools.
"This was a slam-dunk quarter for Microsoft with cloud and AI driving significant business transformation," Wedbush analyst Daniel Ives said, adding that the firm is entering a “new phase of monetization on the AI front."
Speaking to analysts, executives indicated that, like other mega-cap tech companies, Microsoft expects to continue shelling out more and more cash on AI, as it looks to rapidly build up the data centers that undergird these models. CFO Amy Hood said Microsoft is forecasting capital spending of over $30 billion in its first quarter -- after having registered a 27% year-over-year rise in capex to $24.2 billion in the prior period.
Analysts at BofA Securities said that while the full-year capex outlook exceeds their projections, the spending is backed by "solid demand signals."
"[The] fourth-quarter results validate our view that Microsoft is an AI beneficiary in both applications and infrastructure," the brokerage wrote in a note, adding that, given the size of the estimated $155 billion size of the AI software market, "this sets up Microsoft for durable mid/high teens topline growth for years to come."
(Pratyush Thakur contributed reporting.)