Microsoft rides the AI wave, beating revenue estimates

26 Apr 2023

Image: © Dragoș Asaftei/

Having invested hugely in generative AI and ChatGPT specifically, the tech giant saw revenue increase by 7pc.

Despite a turbulent time for the tech industry amid mass layoffs, Microsoft has enjoyed a strong earnings call for the third quarter of its fiscal year.

Revenue jumped 7pc to almost $53bn compared to the corresponding period last year, beating Wall Street’s estimates for quarterly revenue, while net income was up 9pc to $18.3bn.

Operating income was $22.4bn, while diluted earnings per share was $2.45 – both showing an increase of 10pc.

These results show a strong pattern of growth following its second fiscal quarter reported in January 2023.

An AI-powered boost

In a statement, Microsoft’s chair and CEO, Satya Nadella, spoke about advanced AI models and “a new era of computing”, suggesting the company’s investment in ChatGPT and generative AI as the reason for the strong results.

“Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI,” he said.

Microsoft has been in partnership with AI tool maker OpenAI since 2019. But since the start of 2023, the tech giant’s investment in OpenAI and generative AI tools has skyrocketed.

In February, the company revealed a new Bing search engine and Edge browser with AI capabilities in the hope of challenging Google’s market dominance.

By the beginning of March, Bing had reached 100m daily users, with a significant portion flocking towards the new AI-powered search feature.

Workplace productivity stays strong

Outside of its AI investments, there were also very clear boosts to Microsoft’s revenue within the productivity and business process services, increasing by 11pc to $17.5bn overall.

Office commercial products and cloud services revenue increased by 13pc, while its consumer products and services increased by 1pc.

LinkedIn revenue was up by 8pc and Dynamics products and cloud services revenue increased by 17pc. The latter was largely driven by revenue growth in Dynamics 365, which was up 25pc.

Microsoft’s executive vice-president and chief financial officer, Amy Hood, said the team’s focus saw the company’s cloud revenue increase by 22pc.

The boost in cloud reflects a similar trend for Alphabet, which saw its cloud division enjoy a profitable quarter for the first time.

However, it wasn’t all good news for Microsoft. With PC sales continuing to decline, the company’s Windows OEM revenue – which represents the PC side of the business – saw a decline of 28pc, while devices revenue decreased by 30pc.

The company was also part of a cohort of tech giants that cut thousands of jobs, with Nadella confirming approximately 10,000 layoffs at the beginning of this year.

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Jenny Darmody is the editor of Silicon Republic