- Microsoft’s quarterly revenue rose 17% to $81.3 billion, Microsoft Cloud revenue is 63% of this
- Investors are concerned about the reliance on AI model makers, OpenAI and CapEx
- Nvidia still plays a role in Microsoft’s plans going forward
Microsoft posted a 17% year-over-year increase in quarterly revenue ($81.3 billion), but despite this success, investors seem to be concerned about bigger things at stake than just the company’s finances.
Share prices actually fell 6% in after-hours trading, with investors likely worried about Microsoft’s heavy reliance on AI model makers and huge capital spending.
And despite Microsoft losing its right of first refusal as OpenAI’s computing provider, the company is still heavily tied to the ChatGPT maker in more ways than one, adding to the pressure it faces to gain investor confidence.
Microsoft’s revenue increases, but share prices fall
In its earnings announcement, Microsoft admitted that its commercial remaining performance obligation rose 110% to $625 billion.
Almost half (45%) of this is tied to OpenAI, after OpenAI had plans to buy an additional $250 billion in Azure services, with Microsoft CFO Amy Hood stressing that the remaining 55% of its backlog is spread across different industries, geographies and customers and is unrelated to OpenAI.
Still, Hood praised the performance of Microsoft Cloud, which has now hit $50 billion in quarterly revenue — in other words, the division is now responsible for nearly two-thirds (63%) of the company’s entire revenue.
“We’re only at the beginning of AI deployment, and Microsoft has already built an AI business that’s bigger than some of our biggest franchises,” CEO Satya Nadella declared. “We’re pushing the envelope across our entire AI stack to create new value for our customers and partners.”
During the most recent quarter, Microsoft’s CapEx reached $37.5 billion, or nearly half (46%) of its entire revenue, with an estimated two-thirds spent on GPUs and CPUs, Hood explained on the call.
Microsoft also hinted at a continued reliance on Nvidia chips despite internal efforts with its own Maia hardware. Nvidia shares have rallied in recent weeks on concerns about an impending AI bubble and increased activity by customers producing their own chips.
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