Microsoft Revenue Accelerated as Cloud, AI Demand Lifted Results
Microsoft Cloud revenue reached $54.5 billion, up 29% from a year earlier.
Microsoft (MSFT) reported faster March-quarter revenue growth as the software maker’s cloud and AI businesses outweighed softer personal-computing results. Revenue rose 18% to $82.9 billion, accelerating from 17% growth in the prior quarter and 13% growth a year earlier.
The quarter extended a shift toward cloud and AI as Microsoft disclosed that its AI business had surpassed a $37 billion annual revenue run rate, up 123% from a year earlier. Commercial remaining performance obligation rose 99% to $627 billion, though the balance was only $2 billion higher than in December and the growth rate slowed from 110%.
Earnings growth was more uneven. Operating income increased 20% to $38.4 billion, slowing from 21% in the December quarter and 24% in September, and was nearly flat sequentially. GAAP net income rose 23% to $31.8 billion, while diluted earnings were $4.27 a share, up 23% from a year earlier.
The sequential earnings comparison was shaped by investment accounting. Net income fell from $38.5 billion in December, when OpenAI investment gains added $7.6 billion; the March quarter included a $14 million OpenAI loss. On a non-GAAP basis, earnings rose 21%, slower than 24% growth in the prior quarter.
Intelligent Cloud remained the main driver, with revenue rising 30% to $34.7 billion, marking a fifth straight acceleration from the year-earlier March quarter’s 21% growth. Azure and other cloud services revenue increased 40%, matching September’s pace and improving from 33% growth a year earlier.
Productivity and Business Processes revenue rose 17% to $35.0 billion, helped by faster growth in Microsoft 365 Consumer cloud revenue and LinkedIn. Dynamics 365 revenue rose 22%, above December’s 19% pace, while More Personal Computing revenue fell 1% to $13.2 billion as Windows OEM and Devices revenue declined 2% and Xbox content and services revenue fell 5% for a second straight quarter.
The cloud buildout kept pressure on margins and cash requirements. Gross margin dollars rose to $56.1 billion from $48.1 billion, while the gross margin rate slipped to about 67.6% from about 68.7% a year earlier. Intelligent Cloud operating margin narrowed to about 39.7% from about 41.5%, and additions to property and equipment climbed to $30.9 billion from $16.7 billion a year earlier.
Microsoft did not provide a comparable forward outlook in the provided release excerpts. The quarter left the company with faster top-line momentum, a larger contracted-revenue base and heavier infrastructure spending tied to the AI and cloud demand it said was reshaping the business.
Source: company public filings.