Revenues at Microsoft rose in the first quarter of FY 2025, driven in large part by strong continuing demand for AI-powered services. According to the firm’s latest earnings release, revenues increased by 16% to $65.6bn, while net income rose by 11% to $24.7bn. However, the revenue figures fell short of analyst expectations, leading to a dip in Microsoft’s stock price of 4% in extended trading.
The software giant’s chief executive, Satya Nadella, was naturally effusive about the role AI was playing in driving his employer’s revenue growth. “AI-driven transformation is changing work, work artefacts, and workflow across every role, function, and business process,” he said. “We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage.”
Earnings up for Redmond
Revenues increased across most of Microsoft’s major departments. Microsoft 365 Commercial products and cloud services revenue, for example, was up 13%, while at LinkedIn it was up by 10%. Server products and cloud services revenue, meanwhile, rose by 23%.
Despite this, Microsoft reported that its outside suppliers had been late in delivering data centre infrastructure to the company. Consequently, its second-quarter targets in this area will be missed – a prospect Nadella minimised in a subsequent conference call with market analysts. “I feel pretty good that going into the second half of even this fiscal year that some of that supply-demand will match up,” he said.
Microsoft AI commitment
Of particular interest to industry watchers was Microsoft’s continued commitment to AI-powered products and services, amid growing nervousness that market interest in both may be faltering. For its part, Redmond seemed committed to its multi-billion dollar bet on the technology. Speaking to market analysts, Nadella was bullish, stating that its AI business was on course to make over $10bn in sales this quarter, “the fastest business in our history to reach this milestone.”
Indeed, AI has been a boon for Microsoft’s cloud business. Growth at Azure held at 34%, with a third of that attributed to customer engagement with products from Redmond’s partner, OpenAI. Nadella dismissed rumours that Microsoft’s relationship with the ChatGPT creator – Redmond supplies not only vast amounts of cloud computing clout to OpenAI, but billions in funding – had become strained. Rather, he said, Microsoft’s alliance with OpenAI had proven “super beneficial,” adding that the former had correctly bet on the future of what is now one of the world’s most highly-valued startups.
Read more: UK government and Microsoft sign new partnership to accelerate public sector digitalisation
