Microsoft forecast on Wednesday a record $30 billion in capital spending for the current fiscal first quarter, after booming sales in its Azure cloud computing business showcased the growing returns on its massive bets on artificial intelligence, Reuters reports.
Shares of the software company rose 9 percent in extended trading after it said Azure sales surpassed $75 billion on an annual basis, the first time it has disclosed that figure, beating expectations for $74.62 billion.
Microsoft's higher-than-expected capital expenditure forecast - its largest ever for a single quarter - put it on track to potentially outspend its rivals over the next year. It came after Google said it would spend more on data centers to meet demand for AI services, and Meta projected higher sales with only modest increases in spending. The trio of results could help resolve investor questions about whether Big Tech is benefiting from its massive data center buildout, with capital spending to reach $330 billion this year.
Microsoft and Meta's results helped fuel a $500-billion gain in AI stocks.
"I feel very good that the spend that we're making is correlated to basically contracted, on-the-books business that we need to deliver," Microsoft Chief Financial Officer Amy Hood said on a conference call with investors.
Microsoft's cloud business still trails market leader Amazon Web Services which had a head start in cloud computing and brought in $107.56 billion in its most recent fiscal year. But investors said Microsoft's new revenue figure indicates its investments are translating to increased sales.
"Now that Microsoft's disclosing that number, it's really just helping justify the huge investments," said Dave Wagner, portfolio manager at Aptus Capital Advisors, which holds Microsoft shares.
Rival Alphabet's earnings also showed last week that AI spending was rising, but so were the returns, as it beat revenue estimates and lifted its outlay forecast by $10 billion.
Microsoft said Azure revenue jumped 39 percent in the June quarter, more than the average analyst estimate of 34.75 percent, according to Visible Alpha. The company said it expects growth of 37 percent for the current quarter, beating analyst estimates of 33.5 percent, according to Visible Alpha data.
Microsoft has said the spending is crucial to overcoming supply constraints that have hampered its ability to meet soaring AI demand. The fiscal first-quarter capital expenditure estimate of $30 billion surpassed analysts' expectations of $23.75 billion, according to Visible Alpha data.
In the just-ended fiscal fourth quarter, capital spending rose 27 percent to $24.2 billion, compared with estimates of $23.08 billion, per Visible Alpha.
Microsoft said its Copilot AI tools had surpassed 100 million monthly active users, the first time it has provided such a figure. Google has said rival Gemini has 450 million active users.
Overall revenue rose 18 percent to $76.4 billion in the April-June period, Microsoft's fiscal fourth quarter. Analysts on average expected $73.81 billion, according to data compiled by LSEG.
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