Microsoft reported better-than-expected fiscal fourth quarter earnings and Azure growth was 26% compared to a year ago. Azure growth was 40% a year ago and has fallen each quarter in fiscal 2023.
The software and cloud giant reported fourth quarter net income of $20.1 billion, or $2.69 a share, on revenue of $56.2 billion, up 8% from a year ago. CEO Satya Nadella said the company remains “focused on leading the new AI platform shift.”
Wall Street was expecting Microsoft to report fourth quarter earnings of $2.55 a share on revenue of $55.47 billion. Leading up to Microsoft's earnings, investors and analysts were upbeat about the software giant's revenue gains from its new Microsoft 365 Copilot pricing.
Microsoft 365 Copilot will run you $30 per user per month for Microsoft 365 E3, E5, Business Standard and Business Premium customers.
While there will be multiple generative AI winners in the tech sector, Google vs. Microsoft, which is partnered with OpenAI, is the main card. It’s a battle that will take years to play out.
Nadella said on a conference call with analysts that Azure is taking share when enterprises redeploy workloads. Nadella said the priority is making Azure the go-to cloud for generative AI and interest in CoPilot has been strong.
Key recent headlines include:
- Microsoft officially enters process mining, automation ring with Process Automate Process Mining
- Microsoft Inspire: Microsoft 365 Copilot pricing, process mining, Meta and Epic partnerships
- Microsoft unveils Microsoft Fabric at Build 2023, pitches integration, simplified pricing
- Analysis: Microsoft's AI and Copilot Announcements for the Digital Workplace
Microsoft’s cloud business was the main attraction. Microsoft is looking to infuse AI throughout its stack, but it’s unclear how fast customers can leverage AI.
CFO Amy Hood said:
"In Azure, we expect revenue growth to be 25% to 26% in constant currency, including roughly 2 points from all Azure AI Services. Growth continues to be driven by our Azure consumption business, and we expect the trends from Q4 to continue into Q1. Our per user business should continue to benefit from Microsoft 365 suite momentum, though we expect continued moderation in growth rates, given the size of the installed base."
By the numbers for the fourth quarter:
- Microsoft Cloud fourth quarter revenue was $30.3 billion, up 21% from a year ago.
- Office Commercial products and cloud services revenue was up 12% from a year ago.
- LinkedIn revenue was up 5%.
- Intelligent Cloud revenue was $24 billion, up 15%.
- Windows OEM revenue fell 12% and devices revenue fell 20%.
- For fiscal 2023, Microsoft delivered net income of $72.4 billion, or $9.68 a share, on revenue of $211.9 billion, up 7% from a year ago.
- Search and news advertising revenue excluding traffic acquisition costs was up 8% in the fourth quarter.
- Office Commercial seat growth in the fourth quarter was up 11% from a year ago.
- Microsoft said it had 67 million Microsoft 365 Consumer subscribers.
- For fiscal 2023, Microsoft spent $27.2 billion on research and development, up from $24.5 billion a year ago.
