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Stock prices rise as AI makes record profits

Topline

Microsoft's third calendar quarter earnings were the strongest in the company's five-decade history, as the Washington-based computing giant capitalizes on the next generation of technological innovations in generative artificial intelligence.

Important facts

In its earnings report released Wednesday afternoon, Microsoft reported record earnings of $3.30 per share and net income of $24.7 billion, beating average analyst forecasts of $3.10 per share and net income, according to FactSet of $23.2 billion.

The company posted revenue of $65.6 billion in the three months ended Sept. 30, beating estimates of $64.6 billion and the previous quarter's record of $64.7 billion.

Revenue from Microsoft's cloud computing service Azure rose 33% year over year, also exceeding forecasts of 28.6% growth for Azure, Microsoft's most public generative AI initiative.

Shares of Microsoft rose 2% in after-hours trading.

Important background

Microsoft's report is the latest in a week of gains, following Google's release on Tuesday and top reports from fellow tech titans Amazon and Apple on Thursday afternoon. The first quarter of Microsoft's fiscal year 2025 was also the first since Microsoft adjusted the reporting of its business unit's performance. Analysts say this move should better reflect competition between Azure and rival enterprise cloud computing service Amazon Web Services. But it's a change that Bernstein analyst Mark Shmulik said could cause “confusion” among investors following this report, as expectations realign for Microsoft's wide-ranging businesses. With net income of $88 billion in its most recent fiscal year, Microsoft is one of the most profitable companies in the world, trailing only Apple and Berkshire Hathaway among U.S. companies.

Big number

87%. That's how much Microsoft shares have risen over the past two years through Wednesday's close, outperforming the S&P 500 and rival Apple by 54% and 50%, respectively, according to FactSet data including reinvested dividends.

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