TLDR
Microsoft’s earnings for the second quarter of the 2024 fiscal year beat analyst estimates, driven by strong performance in its cloud segment. CEO Satya Nadella highlighted the growth of Azure AI and the company’s focus on scaling artificial intelligence. The success of Microsoft’s partnership with OpenAI and the expected AI adoption cycle were also discussed during the earnings call.
Key Points:
- Microsoft’s cloud segment, particularly Azure AI, fueled the company’s earnings beat in Q2 2024.
- The company is focusing on applying AI at scale and infusing AI across its tech stack to win new customers and drive productivity gains.
- Microsoft’s partnership with OpenAI and its own AI tools and hardware were major drivers of performance in the quarter.
- The company expects an AI adoption cycle as customers using its AI tech see changes in work and workflow.
Microsoft’s cloud revenue was up 20% in Q2 2024, with Azure AI playing a key role in driving growth. Azure offers top performance for AI training and inference, as well as a diverse selection of AI accelerators. The company reported that it has 53,000 customers for Azure AI, with a third of them being new to the service in the past year. Microsoft’s focus on AI extends beyond Azure, with CEO Satya Nadella emphasizing the company’s commitment to applying AI at scale across its entire tech stack.
The partnership between Microsoft and OpenAI was highlighted as a major driver of the company’s performance in the quarter. Azure OpenAI and OpenAI’s own API on top of Azure contributed to the 30% growth seen in Azure and other cloud services revenue. AI services accounted for six points of that growth. While the earnings call did not address recent regulatory probes into the OpenAI partnership, it demonstrated the importance of the collaboration to Microsoft’s business.
Nadella discussed the expected AI adoption cycle, comparing it to the adoption of personal computers in corporate work. He noted that as customers start using Microsoft’s AI technology, they will see changes in work and workflow, leading to broader adoption. The CEO mentioned several major companies, including Ally Financial, Walmart, and Coca-Cola, that are already benefiting from Microsoft’s AI tools.