Microsoft Corp. MSFT revealed transformative momentum in its artificial intelligence business, announcing a $13 billion annual AI revenue run rate alongside a major Azure commitment from OpenAI that propelled commercial bookings to unprecedented levels in the second quarter.
What Happened: CFO Amy Hood during the Wednesday earnings call noted that while the OpenAI commitment significantly boosted second-quarter bookings, it represents just the “first tranche” of future growth potential.
The partnership exemplifies Microsoft’s broader AI strategy, with Hood highlighting that over half of their cloud and AI-related spending targets long-lived assets supporting customer growth over the next 15 years.
The tech giant reported a 175% year-over-year surge in AI revenue, while commercial bookings jumped 67% (75% in constant currency), driven by OpenAI’s expanded Azure commitment.
This strategic partnership helped push Microsoft’s commercial remaining performance obligation to $298 billion, with quarterly cloud revenue exceeding $40 billion for the first time.
Why It Matters: “Enterprises are beginning to move from proof of concepts to enterprisewide deployments to unlock the full ROI of AI,” said CEO Satya Nadella. He emphasized that OpenAI’s APIs exclusively running on Azure gives customers confidence in accessing leading AI models.
Despite this AI momentum, Microsoft faced some headwinds in Azure’s non-AI services due to execution challenges in their scale motions. However, the company’s overall performance remained robust with total revenue of $69.6 billion, up 12% year-over-year.
Looking ahead, Microsoft expects to align AI capacity with demand by fiscal year-end 2025, supported by $22.6 billion in quarterly capital expenditures. The company projects continued double-digit revenue growth as enterprise AI adoption accelerates beyond initial testing phases.
Price Action: Microsoft shares are down 4.63% after-hours at $421.85 on Wednesday, according to data from Benzinga Pro.
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