Investors who are concerned about the heavy expenditures of major tech firms on artificial intelligence (AI) found a little comfort in the latest financial report by Microsoft released on Wednesday.
In the quarter that ended on the 31st of December, Microsoft continued its aggressive expansion of data centers to support cloud computing and AI initiatives. It invested a huge amount of $22.6 billion in capital expenditure which is nearly double what it spent the previous year.
The tech giant has projected an investment of around $80 billion in data centers for the current fiscal year which concludes in June. This fast pace is driven by an urgent need to boost capacity to satisfy the increasing demand for AI and cloud services.
Despite the significant spending, Microsoft reported a strong growth in profits and revenue. The company achieved revenue of $69.6 billion marking a 12% increase from the previous year, whereas the profits climbed to 10% to reach $24.1 billion.
These results surpassed Wall Street’s forecasts and even Microsoft’s own expectations. Satya Nadela, CEO of Microsoft during a call with investors stated, “As AI becomes more efficient and accessible, we will witness an exponential increase in demand.”
The urgency surrounding AI spending among major tech companies has even intensified after the Chinese start-up DeekSeek came into the market. It surprised the AI landscape with an advanced AI system that claimed to have been developed at a fraction of the cost and resources as compared to leading tech firms.
As the first major cloud provider to launch financial results after the announcement of DeepSeek, Microsoft saw a stock dip of approximately 5% in after-hours trading.
Sales growth of Microsoft’s flagship cloud service also slowed down to 30% which is slightly falling short of what Wall Street expected. Significantly, over a third of that growth was associated with artificial intelligence.
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