Microsoft reported record sales and profits on Tuesday, as it shook off recession fears and began seeing the early impacts of its investments in generative artificial intelligence.
The company had $56.2 billion in sales in the three months that ended in June, up 8 percent from a year earlier. Profit hit $20.1 billion, up 20 percent. The results beat analyst expectations and Microsoft’s own estimates.
The profits beat Microsoft’s previous record of $18.8 billion, in December 2021, even as capital expenses grew to $10.7 billion, which included costs to build out data centers and buy expensive chips necessary for developing cutting-edge A.I.
Investors have rallied behind Microsoft in recent months as the company has unveiled generative A.I. features across its products, including integrating a chatbot into its Bing search engine and adding an A.I. assistant to its software used in offices around the world.
“Organizations are asking not only how — but how fast — they can apply this next generation of A.I. to address the biggest opportunities and challenges they face — safely and responsibly,” Satya Nadella, the company’s chief executive, said in a statement.
Last week, the company announced pricing for Microsoft 365 Copilot, an A.I.-powered assistant for its popular productivity software, including Word, Excel and PowerPoint. The price — $30 per user each month — was more than analysts had expected and pushed Microsoft’s market capitalization above $2.6 trillion for the first time.
Sales of Azure, Microsoft’s flagship cloud computing product, were up 27 percent in the quarter, excluding fluctuation in foreign currency, at the high end of the range the company had indicated that investors should expect. The company had told investors to expect about one percentage point of that growth to come from A.I. services.
Analysts at Bank of America told investors last week that Azure was gaining market share because technology executives at the companies that Microsoft served viewed the platform “as the leading A.I. offering.”
The biggest drag on Microsoft’s business has been declining sales in personal computers — which often come with Microsoft’s Windows operating system installed — as consumers and businesses pull back from the surge in purchases they made to work and study from home during the height of the pandemic. Sales in Microsoft’s personal computing business segment were down 4 percent, to $13.9 billion.