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Microsoft Experiences a 33% Surge in Profits fuelled by Investments in AI and Cloud Cmputing

Microsoft Corp. reported a 33% surge in profits for the October-December quarter, attributing the growth to substantial investments in artificial intelligence technology. The company highlighted that the increase primarily stemmed from the expansion of its cloud-computing unit, which is the focal point of Microsoft’s AI investments.

The company disclosed a net income of $21.87 billion for the quarter, equivalent to $2.93 per diluted share, surpassing Wall Street’s projections of $2.79 per share. The software maker, headquartered in Redmond, Washington, achieved a revenue of $62.02 billion in the quarter, marking an 18% increase from the previous year’s $52.75 billion, and also exceeding expectations.

“Microsoft is solidifying its position as a leader in the AI race,” remarked Jeremy Goldman, Director of Briefings at Insider Intelligence. Alongside various advantages, Goldman proposed that AI technology could contribute to the expansion of Microsoft’s market share in digital advertising. His firm predicts a 12% growth in Microsoft’s global ad revenues this year, reaching $14.93 billion. However, it acknowledges that Google is anticipated to enlarge its significantly larger ad business by 10% in the same period.

Analysts surveyed by FactSet Research had anticipated Microsoft to generate revenue of $61.14 billion, and they currently project revenue of $60.97 billion for the January-March quarter. These results are the initial ones to include the financials of video-game maker Activision Blizzard, officially acquired by Microsoft on Oct. 13 for $69 billion.

The merger elevated Microsoft’s revenue growth by four points, as reported by James Ambrose, the company’s Director of Investor Relations. However, it also led to a reduction in operating profits by approximately $440 million due to purchase accounting adjustments and integration and transaction costs, he mentioned.