Microsoft's AI Revenue Growth on Track to Reach $10 Billion

Microsoft Corp (MSFT) recently announced during its first-quarter earnings call that its artificial intelligence business is set to surpass a significant milestone, targeting an annual revenue run rate of over $10 billion in the upcoming quarter. This achievement would solidify its position as the fastest-growing business segment in Microsoft's history.

What Happened: CEO Satya Nadella spoke about the swift adoption of AI technologies integrated within the company's diverse product offerings. He noted strong demand from customers and the extensive implementation of AI technologies across enterprises.

According to Nadella, "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process, helping customers drive new growth and operational efficiency." He further emphasized that, "Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone."

This impressive growth can be attributed to several key developments in AI:

• Nearly 70% of Fortune 500 companies are using Microsoft 365 Copilot.
• The usage of the Azure OpenAI Service has more than doubled in the last six months.
• There has been a 55% quarter-over-quarter increase in GitHub Copilot enterprise customers.

CFO Amy Hood also highlighted the strategic importance of investing in AI. She stated, "Only 2.5 years in, our AI business is poised to exceed an annual revenue run rate of $10 billion in Q2. This will mark the fastest business in our history to reach such a milestone."

Why It Matters: Microsoft’s Azure cloud service experienced a 33% growth, with AI services contributing nearly 12 points to this overall expansion. However, the company acknowledged that demand currently surpasses available capacity, which necessitates further investment in infrastructure.

In addition to the AI growth, Microsoft reported an overall revenue of $65.6 billion for the first quarter, reflecting a 16% increase year-over-year. The Microsoft Cloud segment alone reached $38.9 billion, showing a growth of 22%.

Price Action: As of Wednesday, the stock for Microsoft Corp closed at $432.53, with a slight increase of 0.13%. However, after-hours trading saw a decline of 3.71%. Year-to-date, Microsoft shares have appreciated significantly, with a rise of 16.63%, based on data gathered.

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Microsoft, AI, earnings