Microsoft shares have jumped more than 8% in pre-market trading as the tech giant beat estimates on quarterly revenue guidance. The company has been making headlines with its bold bet on OpenAI, the firm behind the popular generative AI chatbot ChatGPT.

Microsoft Revenue and Profit Top Estimates

On Tuesday, Microsoft released the fiscal year 2023 third-quarter financial results, which exceeded analysts’ predictions. The strong results were driven by growth in its cloud computing and Office productivity software businesses, and the company said AI products were stimulating sales.

Microsoft reported $52.9 billion in revenue for the fiscal third quarter, up by 7%. The figure exceeds the average analyst estimate of $51.02 billion, according to Refinitiv. Most Microsoft sales still come from selling customers software and cloud computing services.

Microsoft’s Intelligent Cloud business segment, which includes the Azure public cloud, Enterprise Services, SQL Server, and Windows Server, generated $22.08 billion in revenue. That figure is up by 17% and beat the $21.94 billion consensus among analysts surveyed by StreetAccount.

The company detailed that its cloud business Azure growth was 27% in the latest reported quarter, beating analyst expectations for 26.6% growth. However, growth from Azure and other cloud services still slowed from 31% in the prior quarter.

“Focused execution by our sales teams and partners in this dynamic environment resulted in Microsoft Cloud revenue of $28.5 billion, up 22% (up 25% in constant currency) year-over-year,” said Amy Hood, executive vice president, and chief financial officer of Microsoft.

Revenue in the Productivity and Business Process segment, which contains Dynamics, LinkedIn, and Office, reached $17.52 billion in the latest reported quarter, up about 11% and above the StreetAccount consensus of $17.05 billion.

Microsoft Predicts Higher Revenue for Fiscal Q4 Amid AI Optimism

During a conference call with analysts, Microsoft finance chief Amy Hood called for $54.85 billion to $55.85 billion in revenue for the fiscal fourth quarter, CNBC reported. The middle of the range, at $55.35 billion, suggests a 6.7% growth and beats the $54.84 billion consensus among analysts surveyed by Refinitiv.

Hood reportedly attributed a portion of the increased revenue to AI. “As with any significant platform shift, it starts with innovation, and we’re excited about the early feedback and demand signals from the AI capabilities we’ve announced to date,” she said.

“We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time.”

Microsoft Continues AI Push

In January, the tech giant announced a new multibillion-dollar investment in OpenAI. While the company did not provide a specific dollar amount, reports claimed Microsoft intended to invest as much as $10 billion.

Microsoft has already created some AI-powered experiences thanks to the partnership. These include a new version of its Bing search engine that uses AI to respond to prompts and enhancements to the Microsoft 365 productivity software.

Bing has 100 million daily users and has seen downloads jump since the addition of AI features, Chief Executive Satya Nadella said. Specifically, he claimed that “daily installs of the Bing mobile app have grown [four times] since launch.”

The CEO added that Microsoft has more than 2,500 customers using its Azure OpenAI service, which became generally available in January and had GPT-4 incorporated in March.

“We have the most powerful AI infrastructure, and it’s being used by our partner, OpenAI, as well as NVIDIA and leading AI startups like Adept and Inflection to train large models. Our Azure OpenAI Service brings together advanced models, including ChatGPT and GPT-4, with the enterprise capabilities of Azure.”

Nadella also called Microsoft 365 Copilot released last month the “future of work.” The company described this new program as an AI chatbot assistant that works alongside emails, documents, meetings, and the new Business Chat service.

OpenAI is one of the top three AI labs in the world, according to AI researchers. The company has developed game-playing AI software that can beat humans at video games such as Dota 2, and its GPT-4 is arguably the most powerful AI model available so far.

Meanwhile, Microsoft shares are currently up 8.2% in pre-market trading amid solid quarterly performance. The company’s shares are also up around 15% YTD, while the S&P 500 index is up 6% over the same period.

This article originally appeared on The Tokenist

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