The money continues to pour in by the bucketful at Microsoft, despite results in terms of AI (and its cloud requirements) falling somewhat short of high expectations. Last quarter, the company posted a net profit of 22 billion dollars (20.3 billion euros), and a revenue of 64.7 billion dollars (59.7 billion euros). That’s 10 percent more profit and 15 more revenue than in the same period last year.
The company generated over 245 billion dollars in revenue for the past fiscal year, over 226 billion euros. That resulted in a net profit of 88 billion dollars, or a good 81 billion euros. That’s an increase of 16 percent and 22 percent, respectively. This growth is slightly less substantial compared to the previous year.
Despite these impressive figures, the value of Microsoft shares dipped after the quarterly figures were presented. This was partly because the company’s Intelligent Cloud division had not lived up to analysts’ expectations.
This is where cloud services such as Azure live—the places running AI workloads. Despite also seeing revenue growth here to the tune of 28.5 billion dollars, and workhorse Azure alone accounting for its own 29 percent increase in revenue, this failed to impress stock market analysts.
After Microsoft’s 7 percent share drop, other tech companies followed. Amazon and Nvidia, for example, also saw their stock market value decline. This may indicate a cooling period after earlier expectations around AI kept rising to a fever pitch.
Growth thanks to Copilot functionalities
Microsoft has been buzzing a lot about Copilot, the company’s AI face to the outside world, both for consumers and developers. Therefore, CEO Satya Nadella, during the quarterly earnings presentation, paid ample attention to the fact that the Copilot functionality for this code platform has gained 77,000 users since it was added as a feature two years ago.
This makes Github Copilot the most profitable feature of the platform for Microsoft. The company bought Github in 2018. The platform’s annual revenue run rate is now 2 billion dollars. The (paid) Copilot functionality contributed at least 40 percent to revenue growth.
More Copilot, more revenue?
The 365 suite also saw revenue growth, about 13 percent. As with Github, Microsoft pointed out that much of the growth was due to the addition of Copilot functionality. The company managed to sign up major customers such as Disney, accounting giant EY, and IBM spinoff Kyndryl.
Copilot Studio, which allows customers to build custom AIs, also saw growth. The percentage (70 percent) that Microsoft pulled out of its hat this time was a quarter-over-quarter figure, i.e. growth from the previous quarter rather than the same quarter a year earlier.
Of course, that also has to do with the fact that Copilot Studio has only been around since late last year, but using all these different time periods makes it difficult to make meaningful comparisons. Notably, Microsoft did not share anything else about the profitability of Copilot products.
Growth in other departments except one
The company also posted revenue growth for its Productivity and Business Processes division: 20.3 billion dollars, up 11 percent from the same period last year. The More Personal Computing division saw 15.9 billion dollars or 14 percent growth. As for games, the Xbox division saw a 61 percent increase in revenue, though this is mainly purchased revenue from the October 2023 acquisition of Activision Blizzard.
Sales in the Devices division actually dipped. Sales figures for the latest Surface products, the Laptop 7 and Pro 11, are not yet included in the current figures. These newest Surface devices rely –of course– on Copilot+ functionality.
Rounds of layoffs
Microsoft’s profits stand in stark contrast to the rounds of layoffs the company has made over the past year, including at its Azure division. In early July, at the beginning of Microsoft’s new fiscal year, it also laid off employees.
Earlier, it sent home thousands of workers from its Mixed Reality division and various game development departments. However, website Geekwire reported that the employees who managed to avoid a ‘pink slip’ can actually look forward to an extra cash reward on top of their usual bonuses.
Also read: Azure outage: Microsoft protection actually worsened impact of DDoS attack