Cloud demand props up revenue as company prepares round of buy-outs
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Satya Nadella. Image: Microsoft
Microsoft’s total revenue grew by 18% year-on-year in the quarter that ended on 31 March, reaching $82.89 billion dollars. Net profit came in at $31.78 billion, compared with $25.82 billion in the same quarter a year earlier.
Investors are mainly focused on this cloud division, as it is a key driver of Microsoft’s growth, partly thanks to rising demand for applications related to artificial intelligence (AI).
Revenue from the Microsoft Azure cloud platform rose by around 40% year-on-year in the past quarter, in line with the average market forecasts.
The entire Intelligent Cloud division, which includes Azure, server products and cloud services from GitHub and Nuance, generated revenue of $34.68 billion. That was above the consensus forecast of $34.27 billion from analysts surveyed by StreetAccount.
Although the results were therefore not disappointing, the lack of a clear acceleration in cloud growth caused a degree of caution among investors. At the same time, Microsoft continues to invest heavily in AI infrastructure, pushing up costs and raising questions about the return on those investments.
Lay-offs
Microsoft plans to offer more than 8,700 employees in the United States the option of taking voluntary redundancy. It is the first large-scale voluntary departure scheme in the tech company’s history and forms part of a broader restructuring.
The scheme is aimed at a limited group of employees who meet certain criteria, such as a combination of age and years of service. Reports suggest that about 7% of the US workforce qualifies.
With this measure, Microsoft wants to simplify the organisation and respond more quickly to its strong focus on artificial intelligence. At the same time, its appraisal system and remuneration structure are also being revamped.
Microsoft is currently investing heavily in AI, but is also under pressure from investors who want to see a return on those multi-billion-dollar outlays. According to analysts, the voluntary redundancy scheme fits with this strategic shift in direction.
Amazon previously cut around 30,000 jobs, while software group Oracle reduced its headcount by 10,000.
OpenAI and Microsoft have again adjusted their partnership, resolving a potential legal dispute over OpenAI’s agreement with Amazon.
Until now, Microsoft held exclusive rights to offer OpenAI technology commercially via its Azure cloud platform. Under the new arrangements, OpenAI can now make its models available through other cloud providers as well, including Amazon Web Services (AWS). This clears the way for a previously reported deal with Amazon worth around $50 billion.
Microsoft will, however, remain OpenAI’s main cloud partner until 2032. The company retains access to OpenAI technology and will still receive a share of the revenue under earlier agreements, but no longer on the same exclusive terms.
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