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Microsoft surpassed $4 trillion in market capitalisation on Thursday’s market opening after it published stellar fourth quarter earnings the previous day.
The firm announced that annual revenue for its flagship Azure cloud computing platform surpassed $75 billion or around €64.9 billion, a staggering 34% jump from last year.
The Azure cloud business is a centrepiece of Microsoft’s efforts to shift its focus to artificial intelligence, but until Wednesday, the firm had not lifted the veil on how much money it makes.
The revelation beat Wall Street expectations and pleased investors wary about Microsoft’s ongoing construction of costly new data centres needed to meet cloud computing and AI demand.
Microsoft’s fiscal fourth-quarter profit was $34.3 billion (€2.8 billion), or $3.65 (€3.19) per share, beating analyst expectations for $3.37 (€2.95) per share.
The software giant’s end-of-year earnings report also showed a 24% spike in the company’s quarterly profit.
“We continue to scale our own data center capacity faster than any other competitor,” CEO Satya Nadella said on an investor call, boasting that the company now has more than 400 of the sprawling facilities across six continents.
As a cloud computing platform — which means providing computing power, storage, and tools over the internet instead of on local servers — Microsoft Azure offers businesses and institutions a way to run websites and apps, store and back up data, and analyse massive datasets.
It can also be used for artificial intelligence projects, giving organisations the infrastructure to build, train, and deploy AI models at scale. In short, Azure lets companies innovate and grow without the cost and complexity of maintaining their own hardware.
Microsoft launched Azure more than a decade ago, but the service has increasingly become intertwined with its AI ambitions, as the company looks to sell its AI chatbot and other tools to big business customers that are also reliant on its core online services.
It still trails behind its lead competitor, Amazon Web Services, which reported $107.6 billion or about €94 billion in revenue for its fiscal year that ended in December.
Cost-cutting layoffs
Building the infrastructure to power cloud and AI technology is expensive, and Microsoft has looked for savings elsewhere. It announced layoffs of about 15,000 workers this year even as its profits have soared.
Nadella told employees last week the layoffs were “weighing heavily” on him but also positioned them as an opportunity to reimagine the company’s mission for an AI era.
Still, the overall workforce numbers haven’t changed. The company said it employed 228,000 full-time employees as of June 30, the exact same amount it reported a year ago, though slightly more of them are now US-based and fewer of them are in product support roles or consulting services.
Promises of a leaner approach have been welcomed on Wall Street, especially as Microsoft and other tech giants are trying to justify huge amounts of capital spending to pay for the data centres, chips and other components required to power AI technology.
Microsoft didn’t disclose Wednesday to what extent sweeping US tariffs are affecting its revenue, but its annual report lists tariffs among a number of risks the company faces.
“Increased geopolitical instabilities and changing US administration priorities create an unpredictable trade landscape,” the company said. It also said the “volatility of US tariffs has triggered economic uncertainty and could impact cloud and devices supply chain cost competitiveness”.
