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Microsoft released results on Wednesday night which looked good. The market, though, found something it didn't like and the share price dropped around 6%. Whatevs, we are not interested in these short term gyrations, unless they are up. Joking but not joking.
Revenues increased by 12% off what is already a very high base, coming in at just under $70 billion for the quarter. Operating income increased 17% to $31.7 billion and net income increased 10% to $24.1 billion. Those numbers are just astounding.
CEO Satya Nadella (pictured) said that their AI business has already surpassed an annual run rate of $13 billion after growing 175% year over year. That is only 5% of total revenues but growing fast. We expect AI to continue to thrive as Microsoft works hard to unlock the full benefit of all the money they have spent on Nvidia chips.
DeepSeek is a direct competitor to OpenAI's ChatGPT which has Microsoft as its biggest shareholder. If what they are saying is true, and their technology is open source, then OpenAI should be able to learn some new tricks. Having said that, there is suspicion of foul play and OpenAI has opened up an investigation into whether DeepSeek stole data from OpenAI. The saga continues.
Amongst their other highlights, the Microsoft Azure cloud segment grew 21%, but the market wanted more. Huh.
Microsoft returned $9.7 billion to shareholders this quarter via dividends and share buybacks.
The share price has actually lagged the Nasdaq over the last year, it's gone sideways since February 2024. We see this as a good buying opportunity because Microsoft is one of the greatest companies of all time.
