Microsoft’s latest earnings report reveals significant growth in both revenue and profit, driven largely by its aggressive investments in artificial intelligence (AI). The company reported $81.3 billion in revenue—a 17% increase year-over-year—and $38.5 billion in profit, up 60%. These figures exceeded Wall Street expectations.
AI Spending Soars
Microsoft is doubling down on AI infrastructure, with capital expenditures reaching $37.5 billion in the most recent quarter. This represents a 65% jump from the same period last year. The primary driver behind this spending is the massive demand for AI computing power, particularly for training and running large language models.
The company acknowledges that supply constraints will likely persist through 2026, despite plans to increase AI capacity by over 80% in the next two years. This highlights how quickly AI demand is outstripping available infrastructure. Microsoft’s Azure cloud business, a key indicator of its AI traction, grew by 39%, also beating expectations.
Microsoft and OpenAI: A Deepening Partnership
Microsoft’s AI strategy is heavily intertwined with OpenAI, the creator of ChatGPT. The two companies are restructuring their relationship to ensure Microsoft’s continued access to OpenAI’s technology. Under the new agreement, Microsoft will gain a roughly $135 billion stake in OpenAI and secure unfettered access to its AI models. OpenAI, in turn, will commit to purchasing $250 billion in computing power from Microsoft.
Market Reaction and Future Outlook
Despite the strong earnings, Microsoft’s stock fell over 5% in after-hours trading. This dip may reflect investor concern over the high capital expenditure required to sustain AI growth. CEO Satya Nadella stated that the company is still in the early stages of AI adoption, but its AI business already rivals its largest franchises.
Microsoft’s continued investment in AI signals a long-term bet on the technology’s transformative potential, even as it grapples with infrastructure limitations. The company’s aggressive expansion plans suggest it expects AI demand to remain high for the foreseeable future.
