Microsoft (NASDAQ:MSFT) reported stronger-than-expected fiscal third-quarter results yesterday after the market closed and provided guidance above analysts’ mean estimate. Perhaps more importantly, the software maker seems to have excited investors with its expansive progress and plans on the artificial intelligence (AI) front. MSFT stock is advancing 8% in early trading.
The shares are climbing meaningfully even though a U.K. regulator announced today that it would block Microsoft’s proposed takeover of video game maker Activision Blizzard (NASDAQ:ATVI).
Microsoft’s AI Plans and Progress
On the company’s earnings conference call, CEO Satya Nadella identified “investing to lead in the new AI wave across [MSFT’s] solution areas” as one of the company’s three major “priorities.”
Microsoft intends to incorporate AI into the Power Platform of its GitHub unit. Microsoft’s CEO, Satya Nadella, reported that this move would enable firms to carry out many IT tasks more efficiently, including creating “virtual agents” and launching apps. And the company is launching “the first fully AI-automated clinical documentation application” for healthcare providers. Finally, MSFT continues to find new ways to use AI to strengthen its search engine, Bing.
Among the other areas the company has already incorporated AI are Azure, its cloud business, LinkedIn, and its CoPilot developer tool. More than 2,500 of Microsoft’s customers are using the firm’s Azure OpenAI Service, Nadella reported. The service’s user base rose tenfold in Q1 versus the previous quarter.
Microsoft’s Q1 Results
The firm’s revenue climbed 7% year-over-year (YOY) to $52.86 billion, beating analysts’ average estimate by $1.85 billion. Its earnings per share, excluding some items, dropped 6% year-over-year to $2.32.
But the company’s Intelligent Cloud unit sales soared 18% YOY. On the guidance front, MSFT expects its Intelligent Cloud revenue to increase 15%-16%, excluding currency fluctuations, this quarter, and it anticipates that its Office 365 sales will rise about 16%, excluding currency changes.
Overall, the company predicts that the top line of its current quarter will be $55.4 billion, above analysts’ mean outlook of $54.7 billion.
MSFT Stock: The Activision News
Today, the U.K.’s Competition and Markets Authority blocked Microsoft’s takeover of Activision, citing what it sees as MSFT’s “strong advantages” in cloud gaming. The agency believes the acquisition would enable Microsoft to “harm current and emerging cloud gaming competitors by withholding Activision games from them.”
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
