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Microsoft beat Wall Street’s expectations for revenue and profits in its latest quarter. (GeekWire File Photo)
Microsoft says it’s generating revenue from its artificial intelligence products and services at a rate of $13 billion annually, exceeding the $10 billion run rate that the company foreshadowed previously.
The company on Wednesday reported $69.6 billion in revenue for the December quarter, up 12%, with earnings of $3.23/share, topping Wall Street’s expectations by both measures.
Microsoft’s report for its second fiscal quarter of 2025 comes amid larger questions for the company and the industry about AI breakthroughs from China’s DeepSeek — including dramatic cost efficiencies and novel AI training techniques that are bringing new scrutiny to capital spending by Microsoft and other tech giants.
For the quarter, Microsoft reported capital expenditures of $22.6 billion, a new record high, citing the need to continue increasing capacity to meet demand for its cloud and AI offerings.
“As AI becomes more efficient and accessible, we will see exponentially more demand,” Microsoft CEO Satya Nadella said in his prepared remarks on the company’s earnings conference call.
He added, “Therefore, much as we have done with the commercial cloud, we are focused on continuously scaling our fleet globally and maintaining the right balance across training and inference, as well as distribution.”
Microsoft said Tuesday that it has added DeepSeek R1 to the third-party AI models available via its Azure AI Foundry and GitHub software development platform.
The company reported revenue growth of 31% in from its Microsoft Azure cloud platform and other cloud services, including 13 percentage points of growth from AI services. The Azure growth rate was less than analysts expected, and the company’s shares fell as much as 4% in initial after-hours trading following the report.
Overall, analysts expected revenue of $68.9 billion for the December quarter, and earnings of 3.11 per share.
Microsoft said its commercial bookings rose 67% year-over-year, foreshadowing an increase in future revenue. The company said the increase was due in part to new Azure commitments from OpenAI. The AI startup and ChatGPT maker signed “a new, large Azure commitment” as part of recent changes in their partnership agreement.
Microsoft Cloud revenue was $40.9 billion, up 21% year-over-year. This measure includes Microsoft 365 Commercial cloud, Azure and other cloud services, and the commercial portions of LinkedIn and Dynamics 365.
