Microsoft Reports 33% Rise in Profit

Two weeks ago, Microsoft topped Apple as the most valuable public company. Last week, it surpassed $3 trillion in market valuation. Next week, Satya Nadella will hit his 10th anniversary as the company’s chief executive.

For Microsoft, the pressure to keep delivering is on.

In particular, investors are looking for the company to cash in on what they see as its lead in artificial intelligence. It has invested billions of dollars in OpenAI, the start-up behind the ChatGPT chatbot, and spent last year racing to push its A.I. systems into every product it offers. Microsoft has told investors that A.I. will not start producing meaningful results until this year, but investors have looked for early signs of how much the hype will turn into sales.

On Tuesday, Microsoft gave signs that it is finding a path, as it posted revenue and profits that beat Wall Street expectations.

Revenue was $62 billion in the three months that ended in December, up 18 percent from a year earlier. Profit hit $21.9 billion, up 33 percent.

“We’ve moved from talking about A.I. to applying A.I. at scale,” Mr. Nadella said in a statement.

Microsoft’s commercial cloud offerings broadly brought in $33.7 billion, up 24 percent.

Its flagship cloud computing product, Azure, grew 30 percent, faster than the previous three quarters.

Commercial subscriptions to Microsoft’s cloud productivity suite, including Teams, Word and Excel, rose 17 percent.

Corporate customers have only just begun trying Microsoft’s Copilot offering, which integrates A.I. tools into those productivity programs. Those upgrades became widely available in November and cost $30 per user per month, so even “modest” adoption of the offering can create “meaningful” increases in what customers pay each month, analysts at Bank of America wrote in a recent note to investors.

The New York Times has sued Microsoft and its partner OpenAI for using copyrighted material to develop A.I. technologies. In an interview with “NBC Nightly News” airing Tuesday evening, Mr. Nadella said it was clear “you can’t just use copyrighted material and regurgitate” it, but added that copyright laws “have to essentially now be interpreted for what is a new transformation technology,” according to a transcript.

Gaming has become Microsoft’s most important consumer business, and the results included the first quarter in which the game publisher Activision Blizzard was part of Microsoft. After a year and a half of regulatory reviews around the globe, the company closed the $69 billion deal to buy Activision in October.

Microsoft cut 1,900 jobs in its gaming division last week, largely those of employees brought over through the acquisition.