Microsoft earnings beat and upbeat AI commentary make shares jump 8% in after-hours trading

Microsoft Corp beat quarterly revenue and profit estimates on Tuesday, driven by growth in its cloud computing and Office productivity software businesses.

The company also said artificial intelligence products were stimulating sales.

Revenue in its main segments for the current quarter would match or top Wall Street targets, according to Microsoft's forecast.

Revenue rose 7 percent during the quarter to $52.9 billion, inching past the average analyst estimate of $51.02 billion, according to Refinitiv. Earnings per Share (EPS) of $2.45 also surpassed estimates of $2.23.

In regular trading, fears about earnings had sent Microsoft down 2.2 percent, making it the biggest drag on the S&P 500 on Tuesday ahead of its report.

The bulk of Microsoft sales still come from selling software and cloud computing services to customers.

But the company has grabbed headlines this year with its partnership with ChatGPT creator OpenAI and sprucing up the Bing search engine with artificial intelligence technology.

Microsoft said growth at its cloud business Azure was 27 percent in the latest reported quarter, beating analyst expectations for 26.6 percent growth, according to the consensus from 23 analysts polled by Visible Alpha.

Chief Executive Satya Nadella told investors on a conference call that the company had more than 2,500 Azure-OpenAI service customers and that described AI-powered features in a wide array of products.

Bing has 100 million daily users and has seen downloads jump since the addition of AI features, Nadella said.

Microsoft expects revenue of its Intelligent Cloud unit to be between $23.6 billion - $23.9 billion in the current quarter, in-line with expectations of $23.8 billion.

Revenue from the personal computing and productivity and business process unit, including Office, is also expected to beat estimates in the current quarter.

Analysts had expected a gloomy economic outlook to hit Microsoft's Windows business, which depends heavily on PC sales that have sagged in recent quarters. The sales drop in the segment was less severe than analysts expected, with Microsoft reporting revenue of $13.3 billion versus analyst estimates of $12.19 billion, according to Refinitiv data.

The company's productivity segment, which includes its Office software and advertising sales for the LinkedIn social networking site, also beat analyst expectations with revenue of $17.5 billion versus estimates of $16.99 billion, according to Refinitiv.

Overall revenue for the company's cloud unit, which includes Azure as well as other services, was $22.1 billion, slightly above estimates of $21.85 billion, according to Refinitiv data.

Microsoft shares rose 8.5 percent in after-hours trading to $298.90.