- Microsoft quarterly revenue up 17% to $81.3 billion, including 63% of revenue from Microsoft Cloud
- Investors are concerned about over-reliance on AI model makers, OpenAI and CapEx.
- Nvidia still plays a role in Microsoft’s plans for the future
Microsoft reported a 17% year-over-year increase in quarterly revenue ($81.3 billion), but despite this success, it appears investors are worried about bigger issues than the company’s finances.
Share prices actually fell 6% in after-hours trading, as investors likely worried about Microsoft’s heavy reliance on AI model creators and huge capital expenditures.
And although Microsoft has waived its right of first refusal as OpenAI’s compute provider, the company is still heavily tied to the maker of ChatGPT in more ways than one, adding to the pressure it faces to gain investor trust.
Microsoft revenues up, but stock prices down
In its earnings release, Microsoft admitted that its remaining business performance obligation had increased 110% to $625 billion.
Nearly half (45%) of that amount is related to OpenAI after OpenAI announced plans to purchase an additional $250 billion worth of Azure services, with Microsoft CFO Amy Hood pointing out that the remaining 55% of its backlog is spread across various industries, geographies and customers, and has nothing to do with OpenAI.
Hood nevertheless praised the performance of Microsoft Cloud, which has now reached the $50 billion mark in quarterly revenue – in other words, the department is now responsible for almost two-thirds (63%) of the company’s total revenue.
“We are only in the early days of AI diffusion and Microsoft has already built an AI business that is larger than some of our largest franchises,” CEO Satya Nadella said. “We are pushing the boundaries of our entire AI stack to drive new value for our customers and partners. »
In its most recent quarter, Microsoft’s capital expenditures reached $37.5 billion, or nearly half (46%) of its entire revenue, with about two-thirds spent on GPUs and CPUs, Hood explained on the call.
Microsoft has also hinted at a continued reliance on Nvidia chips despite internal efforts with its own Maia hardware. Nvidia shares have been stagnant in recent weeks amid concerns about an imminent bursting of an AI bubble and increased activity from its customers producing their own chips.
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