Microsoft Sees 16% Sales Growth Amid AI Investment Scrutiny

On Wednesday, Microsoft announced that its quarterly sales have risen by 16% to reach $65.6 billion. The company is working hard to reassure investors that its significant investments in artificial intelligence (AI) are starting to yield positive results.

Microsoft has allocated billions of dollars to enhance its global network of data centers and other essential infrastructure to develop AI technology. This technology is designed to help with various tasks, including document creation, image generation, and serving as a sophisticated personal assistant whether at work or home.

According to CEO Satya Nadella, AI-related products are projected to contribute around $10 billion to Microsoft's annual revenue. He highlighted that this growth represents the "fastest business in our history to reach this milestone," during a call with analysts.

The software giant also reported an 11% rise in its quarterly profit, amounting to $24.7 billion, or $3.30 per share. This figure surpassed Wall Street forecasts for the July to September period, as analysts had estimated earnings of $3.10 per share on revenue of $64.6 billion.

While Microsoft has not disclosed revenue specifically generated from AI products, it noted that the technology and its AI assistant, Copilot, have been integrated across all business segments, especially within the Azure cloud computing division.

Leading the sales growth for the quarter was the productivity segment, which encompasses the Office suite of products, achieving a 12% increase to $28.3 billion. Furthermore, the cloud segment saw a 20% rise compared to last year, reaching $24.1 billion for the three months ending September 30.

The personal computing division, primarily driven by Windows, experienced a 17% growth to $13.2 billion. A significant contributor to this growth was Microsoft's Xbox division, boosted by the acquisition of gaming powerhouse Activision Blizzard last year.

This year, Microsoft also collaborated with computer manufacturers to launch a new range of laptops integrated with AI capabilities as it faces increased competition from other tech giants promoting generative AI technology for both consumers and businesses.

Creating and managing AI systems is resource-intensive, and Microsoft reported expenditures totaling $20 billion last quarter, mainly allocated for its cloud and AI endeavors. This includes constructing energy-intensive data centers and providing the specialized chips necessary for training and deploying AI models.

Additionally, Microsoft has invested heavily in AI startups, particularly its partner OpenAI, the developer of ChatGPT and the foundational technology for Microsoft's Copilot.

Nadella affirmed the company's commitment to encouraging clients to utilize AI tools in their operations as these technologies transform job functions and tasks.

In another note, Nadella, who has been CEO for a decade, saw his annual compensation rise by 63% this year to $79 million, as reported ahead of Microsoft's forthcoming annual shareholder meeting in December. This increase comes despite Nadella's willingness to reduce his cash bonus due to personal accountability regarding cybersecurity issues.

Earlier this year, a critical report from a federal review board revealed significant security failures at Microsoft, allowing state-sponsored hackers from China to gain access to the email accounts of high-ranking U.S. officials.

Microsoft, AI, Sales