Microsoft on Tuesday surpassed Wall Street estimates for fourth-quarter revenue and profit as its cloud business benefited from product upgrades featuring new artificial intelligence (AI) technology.
Revenue rose to $56.2 billion in the quarter ended June, compared with analysts' consensus estimate of $55.5 billion, according to Refinitiv. Net income was $2.69 per share, above estimates of $2.55 per share.
However, shares of the company dropped 2% in after-market trading after it also posted a steep sequential rise in capital expenditure.
Microsoft's Intelligent Cloud unit, which houses the Azure cloud computing platform, grew revenue to $24 billion, compared with expectations of $23.8 billion.
Azure revenue rose 26%, higher than a 25.2% growth estimate from Visible Alpha.
The company does not break out the absolute revenue figure for Azure, the part of Microsoft's business best situated to capitalize on booming interest in AI.
Wall Street is looking at how generative AI services may benefit Microsoft, which secured an early lead with investments in OpenAI, owner of the popular ChatGPT service.
Microsoft is weaving AI into its own products, such as the $30-a-month "Copilot" for its Microsoft 365 service that can summarize a day's worth of emails into a quick update. It is also aiming to sell cloud computing services that other firms will use to build AI services.
The company is still navigating a PC business slump, with sales including of its Windows operating system falling to $13.9 billion, compared with analysts' consensus estimate of $13.6 billion, according to Refinitiv.
The Microsoft segment containing the LinkedIn social network and its Office productivity software grew to $18.3 billion, compared with analysts' consensus estimate of $18.1 billion according to Refinitiv data.
Capital expenditures jumped to $10.7 billion in the fourth quarter from $7.8 billion in the fiscal third quarter, after the company previously told investors that spending would rise as it builds out data centers for AI work.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Devika Syamnath)