Microsoft announced on Wednesday that its profits for the fourth quarter of the year increased by 10%, reflecting the company’s commitment to leveraging the substantial investments made to enhance its artificial intelligence (AI) technology.
While its overall financial results exceeded Wall Street’s expectations, Microsoft slightly fell short of predictions regarding its pivotal cloud computing segment, which is central to its AI ambitions.
During this reporting period, the tech giant recorded a net income of $24.1 billion, translating to $3.23 per share, surpassing the projected earnings of $3.11 per share. The revenue for the quarter stood at $69.6 billion, marking a 12% increase from the same period last year and also exceeding forecasts.
FactSet Research analysts had anticipated Microsoft would generate revenue of $68.87 billion during the last three months of the year.
In the cloud sector, which prominently features its Azure computing platform, Microsoft reported a revenue increase of 19%, reaching $25.5 billion. However, this figure was shy of the $25.83 billion that analysts had predicted.
Microsoft’s productivity division, encompassing its Office suite and various workplace applications, saw a growth of 14%, yielding a total revenue of $29.4 billion. Meanwhile, the personal computing segment, dominated by Windows, held steady at $14.7 billion as a decline in consumer device sales was counterbalanced by a rise in advertising revenue associated with the Bing search engine.
Following these reports, Microsoft shares fell by 5% in after-hours trading Wednesday, although they remained higher than their value from Monday. The drop was part of a broader decline in tech stocks triggered by rising competition from a new AI competitor, DeepSeek, a Chinese tech startup.
Microsoft has a strong partnership with OpenAI, the creators of ChatGPT, and offers its own suite of AI chatbot services under the name Copilot. Concerns over DeepSeek’s rapidly growing capabilities, despite limited funding, contributed to Wall Street’s anxious reactions this week.
During an investor conference call on Wednesday, Microsoft CEO Satya Nadella addressed these anxieties, stating that “DeepSeek had some real innovations,” and emphasized the benefits of improved efficiency and reduced costs in AI development, which he believes will lead to greater consumer access and increased app development.
This week, Microsoft also integrated DeepSeek’s latest AI model into its Azure platform, highlighting its dedication to innovation in AI.
As AI technologies require significant financial resources to develop and manage, Microsoft has disclosed plans to invest $80 billion this year to broaden its global network of data centers, which consume substantial amounts of energy, and to equip these facilities with specialized chips for training and deploying AI models.
According to Nadella, “We have more than doubled our overall data center capacity in the last three years and we have added more capacity last year than any other year in our history.”
