Digital Event Horizon
Microsoft's AI business is driving growth as the tech giant invests heavily in Copilot technology and shifts its focus towards the enterprise space.
Microsoft's Intelligent Cloud segment saw revenue grow 20 percent year on year to $24.1 billion. Azure and other cloud services grew by 33 percent, with Azure Arc winning 39,000 customers. Microsoft's AI business is on track to reach a $10 billion annual run rate next quarter. The company is focusing on demand from the enterprise space and its own products like GitHub Copilot or M365 Copilot. Microsoft sees revenue won from inferencing generating funds for future model training efforts. The company predicted strong growth in most of its major product lines, with Azure expected to grow at 31 or 32 percent.
Microsoft has been on a roll lately, with its latest earnings report revealing a significant increase in revenue and net income. The tech giant's Intelligent Cloud segment, which covers server products and cloud services, saw revenue grow 20 percent year on year to reach $24.1 billion. Azure and other cloud services grew by 33 percent, with Azure Arc – the multi-and-hybrid-cloud management tool – winning 39,000 customers.
But what's driving this growth? Microsoft's answer lies in its AI business, which is on track to reach a $10 billion annual run rate next quarter. This would make it the fastest new product to achieve this milestone in Microsoft history.
At the center of this growth is Microsoft's Copilot technology, which has been gaining traction with blue-chip companies. CEO Satya Nadella revealed that the company is not participating in most GPU rental workloads, instead focusing on demand from the enterprise space or its own products like GitHub Copilot or M365 Copilot.
"We're not actually selling raw GPUs for other people to train," Nadella said during the earnings call. "In fact, that's sort of a business we turn away because we have so much demand on inference" to power the various Copilots and other AI services.
CFO Amy Hood added that Microsoft sees revenue won from inferencing as generating the funds to pay for future model training efforts. However, despite this strategy, costs rose 12 percent in the quarter, with headcount increasing by two percent overall.
Despite these challenges, Microsoft's leaders remain optimistic about the company's future. The tech giant predicted strong growth in most of its major product lines, with Azure expected to grow at 31 or 32 percent, and Productivity and Business Processes wares to grow by ten to eleven percent.
But what does this mean for investors? Microsoft's shares spiked from around $435 to $442 in after-hours trading, before settling at around $417. It seems that investors are hopeful that AI is paying off, but also want to see better news on costs.
As Microsoft continues to invest heavily in its AI infrastructure, one thing is clear: the company is shifting its focus towards the enterprise space and its own products. With this new strategy in place, Microsoft is poised for continued growth and success in the years to come.
Related Information:
https://go.theregister.com/feed/www.theregister.com/2024/10/31/microsoft_q1_fy_2025/
Published: Thu Oct 31 03:06:28 2024 by llama3.2 3B Q4_K_M
