AI was mentioned 175 times during Microsoft’s conference call with analysts to discuss the megacorp’s Q4 financial results – it seems there will be no let-up to the hype in an industry already bursting at the seams with marketing bluster.
Microsoft’s trading output for the three months ended 30 June was decent in the context of the wider market: it reported revenue of $56.2 billion, up 8 percent year-on-year. This was the third straight quarter of less than double-digit gains, and a world away from rates achieved during the pandemic.
These numbers were shaped by the continued dip in Windows licenses and cooling demand for cloud services.
The Intelligent Cloud Group turned over $24 billion in sales, up 15 percent – which is a marked slowdown on recent years. “Growth of new business continued to be moderated for products sold outside the Microsoft 365 suite,” said CFO Amy Hood in an earnings call with financial analysts.
“As expected in Azure, we saw a continuation of the optimization and new workload trends from the prior quarter,” she added.
CEO Satya Nadella revealed on the same conference call that the Microsoft Cloud “surpassed $110 billion in annual revenue, up 27 percent in constant currency, with Azure all-up accounting for more than 50 percent of the total for the first time.”
Unable to resist talking up the potential of AI, Nadella added: “Every customer I speak with is asking not only how, but how fast they can apply next-generation AI to address the biggest opportunities and challenges they face, and to do so responsibly.”
And that’s when the relentless talk about AI began.
Microsoft has injected Copilot, its cloud-based AI tool developed by GitHub and OpenAI, into myriad technologies including Teams, OneNote, PowerPoint, Outlook and more across the Office suite. Some 600 companies were chosen for an early access program in May.
Nadella claimed Azure is grabbing market share from rivals as customers “migrate existing workloads and invest in new ones.”
Azure Arc, for hybrid and multi-cloud management, has won over 18,000 customers since its launch in 2019, and Azure OpenAI Service has 11,000 organizations using it, including IKEA, Volvo Group and Zurich Insurance, Microsoft estimated.
Azure AI Studio is, the CEO assured listeners, the “tool of choice for AI development in this new era, helping organizations ground, fine tune, evaluate and deploy models, and do so responsibly.”
“Nearly 90 percent of GitHub Copilot sign-ups are self-service, indicating strong organic interest and pull-through. More than 27,000 organizations, up 2x quarter-over-quarter, have chosen GitHub Copilot for Business to increase the productivity of their developers, including Airbnb, Dell and Scandinavian Airlines.”
Microsoft also shoe-horned Copilot in Power BI. “One of our tools that’s really taken off is Copilot in Power Virtual Agents, which is delivering one of the biggest benefits of this new area of AI, helping customer service agents be significantly more productive… All-up, more than 63,000 organizations have used AI-powered capabilities in Power Platform, up 75 percent quarter-over-quarter,” said Nadella.
Dynamics 365 was also touched by the wand of AI in Microsoft’s June quarter, with Copilot added to the ERP portfolio.
According to Microsoft, revenues generated in the Productivity and Business Processes division jumped 10 percent to $18.3 billion in its Q4. This was due to better than expected results in Office Commercial, offset by LinkedIn, where revenue was up 5 percent.
With the computer market stuck in the doldrums, Microsoft’s More Personal Computing division reported a decline of 4 percent to $13.8 billion.
Even here, “Windows 11 is also rapidly becoming a powerful new canvas is this new AI era,” said Nadella. “We introduced Windows Copilot this quarter, helping every Windows 11 user become a power user with just natural language and are excited to put it in the hands of more people in the coming months.”
As for security? “More than 1 million organizations now count on our comprehensive AI-powered solutions to protect their digital estate across cloud and endpoint platforms, up 26 percent year-over-year. More than 60 percent including leading enterprises like ABN AMRO, Dow and Heineken use 4 or more of our security products, up 33 percent year-over-year, underscoring our end-to-end differentiation.”
He added: “Our Security Copilot, the first product to apply this next generation of AI to SecOps, will be available to customers via paid early access program this fall.”
Did we forget Copilot for the web? Nadella didn’t. “Bing users have engaged in more than 1 billion chats and created more than 750 million images with Bing Image Creator, and Microsoft Edge took share for the ninth consecutive quarter.”
What did Microsoft do for its investors? It returned $9.7 billion to shareholders in the last three months of its fiscal 2023, a period when employees voiced anger at the company’s pay freeze and a series of job cuts that has seen thousands leave.
Now if only there was an AI solution to that particular problem of humans’ emotions and their pesky expectations.
For the whole of its fiscal 2022, Microsoft reported revenues of $211.9 billion, up 7 percent on 2022, but a slight dip in net profit to $72.4 billion. ®
