Microsoft reported revenue of $81.3 billion for the October-December quarter, up 17% from the same period last year, as the company expands adoption of its artificial intelligence tools, but its stock dropped nearly 5% in after-hours trading despite beating Wall Street expectations.
The company reported net profit of $30.9 billion, or $4.14 per share, excluding the impact from Microsoft’s investments in ChatGPT maker OpenAI. Analysts surveyed by FactSet Research expected earnings of $3.91 per share on revenue of $80.31 billion.
Microsoft’s profit was higher at $38.5 billion, or $5.16 per share, when not incorporating OpenAI investments, reflecting a new accounting practice the company will use going forward. Those investments reflect OpenAI’s restructuring last year. Microsoft held a roughly 27%, or $135 billion stake, in OpenAI as the startup converted from a nonprofit to a for-profit public benefit corporation.
Sales from Microsoft’s AI-focused cloud computing business segment reached $32.9 billion for the last three months of the year, up 29% from the same period last year and above the $32.4 billion expected by analysts. While no longer OpenAI’s exclusive cloud provider, Microsoft retains commercial rights to OpenAI products through 2032.
Zacks Investment Research analyst Bryan Hayes said the stock dip likely reflected “investor scrutiny” over Microsoft’s large spending on the infrastructure of computer chips and data centers needed to power AI. The disconnect between strong earnings and falling stock price suggests investors are questioning whether the massive AI investments will deliver proportional returns.
Microsoft CEO Satya Nadella said on an earnings call that the company is still in the “beginning stages” of AI diffusion, spreading the usage of AI to various sectors. For Seattle, where Microsoft employs thousands, the company’s AI expansion continues driving demand for technical talent and infrastructure development.
