Silicon Valley tech giant Microsoft announced its fiscal 2024 first-quarter earnings for the fiscal year ended September 30, 2023 after the U.S. market on Tuesday (October 25, local time)。Financial data show that Microsoft FY24Q1 total revenue of $56.5 billion, up 13% year-on-year; net profit of $22.3 billion, up 27% year-on-year; diluted earnings per share 2.$99, up 27% YoY。

By business:

The first is the intelligent cloud business that performed well in the financial report.。The Intelligent Cloud segment, which includes Azure, Windows Server, SQL Server, Visual Studio, GitHub, and Enterprise Services, generated $24.3 billion in revenue, up 19% year-over-year, thanks to the massive growth in AI.。Azure and other cloud services revenue increased 29% year-over-year, several percentage points higher than the company's previous expectations.。

Then came Microsoft's productivity and business processes business, which includes Office, LinkedIn, and Dynamics, with $18.6 billion in revenue, up 13 percent year-over-year.。

Finally, more personal computing, including Windows, Xbox, Bing search engine advertising, Surface, and HoloLens augmented reality headsets, generated $13.7 billion in revenue, down 3% year-over-year and 2% year-over-year at constant exchange rates.。

As you can see from the above data, despite the recent tech industry woes, Microsoft's revenue and earnings per share have exceeded Wall Street expectations, with the growth in cloud revenue signaling strong interest in its AI products。Of course, this is mainly due to the company's leading position in the field of artificial intelligence, but also thanks to the company's investment in OpenAI, the developer behind ChatGPT, for several years and billions of dollars.。

Continue to focus on AI development Microsoft 365 Copilot official version will be launched in November

 

As a technology giant investing in OpenAI and actively applying artificial intelligence (AI) technology, Microsoft's AI application progress has attracted much attention.。

In this earnings report, Microsoft CEO Satya Nadella (Satya Nadella) specifically mentioned that the so-called office "intelligent co-driver" Microsoft 365 Copilot, that is, Microsoft's large language model (LLM) capabilities and business data and Microsoft 365 applications The AI component that combines。

Nadella said: "With Copilot, we are making the AI era truly work for people and businesses around the world.。We are rapidly integrating AI into every layer of the technology stack, every role and business process to increase customer productivity。"

Microsoft also said it will officially launch Microsoft 365 Copilot from November, charging $30 per user per month.。

In addition, in the second quarter of this year's earnings call, Nadella said the company saw a very strong signal of AI demand, and expected AI to boost Microsoft in the second half of fiscal 2024.。At the time, Microsoft CFO Amy Hood expected gross margin growth in AI-related businesses to be faster than during the cloud transition.。

Analysts at Citigroup say Microsoft Copilot has huge revenue potential。The agency expects the product to generate at least $5 billion in incremental revenue for the Office line even if penetration is only 5%, close to half of the Office 365 enterprise revenue size (about $9.4 billion) in the fiscal third quarter.。

Microsoft has also pledged to invest A $5 billion ($3.2 billion) over the next two years to expand its cloud and AI capabilities in Australia as part of its broader efforts to improve cybersecurity and digital training.。

The tech giant said it will provide digital skills training to 300,000 people and expand its cyber security threat information sharing agreement with the Australian Signals Agency (ASD).。Microsoft will also increase the number of data centers in major cities by 45%.。

Microsoft says the new data center will help meet its sustainability goals of achieving low carbon, water conservation and zero waste emissions by 2030。

"This is a major investment in the skills and workers of the future."。Australian Prime Minister Anthony Albanese said: "We need to deliver the skills that will enable Australians to succeed in the jobs of the future."。"

Microsoft Vice Chairman and President Brad Smith added that it was the company's largest investment in Australia in the past 40 years and "demonstrates our commitment to national growth and prosperity in the age of AI."。

 

Nvidia and AMD self-developed chips Microsoft or profit from it

 

On October 24, it was reported that Nvidia was secretly developing the central processing unit (CPU) used in personal computers (PCs), with the intention of challenging Intel, the overlord in this field and its direct competitor.。Nvidia's CPU product is based on the Arm architecture and supports the Windows operating system, and is expected to go on sale as early as 2025.。This is also a direct challenge to Intel's X86 architecture monopoly in the PC space.。

Wedbush Securities analyst Matt Bryson said that as the home office becomes a trend, energy conservation becomes the key, and Arm has an advantage in energy conservation。The analyst explained that getting Nvidia and AMD on board with the Arm architecture could help Microsoft develop better products and increase its supply chain.。

Bryson pointed out that Microsoft does not want Apple to have market share because they have a hardware advantage.。It makes sense to diversify the supply chain。Bryson said the Arm architecture has always been considered inferior to Intel (INTC.US) x86 architecture, but Apple has proven that it can produce reliable Arm architecture-based processors。Instead, most Windows-based PCs run on processors designed and manufactured by Intel using the x86 architecture.。

In addition to Apple, Qualcomm has been making chips for Windows laptops since 2016。Qualcomm's entry into PC chips is related to Microsoft。In 2016, Microsoft commissioned Qualcomm to spearhead efforts to migrate the Windows operating system to Arm's underlying processor architecture, which has long powered smartphones and their small batteries.。Since then, Qualcomm has been granted exclusive rights to produce chips for Windows laptops.。

But a recent source revealed that Qualcomm and Microsoft's exclusive agreement on Windows chip design will expire in 2024, and Microsoft seems willing to reach out to more partners, not just Qualcomm.。Microsoft's idea has always been simple, that is, do not want to rely on a single chip supplier, Qualcomm, earlier Intel is the same。

"Microsoft learned from the 1990s that they don't want to rely on Intel again, they don't want to rely on a single vendor.。Jay Goldberg, CEO of D2D Advisory, a consulting firm, said, "If Arm really succeeds in the PC (chip) space, they (referring to Microsoft) will never let Qualcomm be the only supplier."。"

Because Microsoft, like most of the tech industry, is betting its future on AI-related technologies, Microsoft has been encouraging chip makers to build advanced AI capabilities into the CPUs they are designing.。Microsoft launched the intelligent office assistant Copilot this year and is built into many Windows software。The company expects software such as Copilot, which has the blessing of artificial intelligence, to become an increasingly important part of the future use of Windows.。

However, these programs implemented by Microsoft and other chipmakers are not guaranteed to be successful。First, in order to incorporate more AI technology into chip manufacturing, Nvidia, AMD and other chip manufacturers need to invest more chip resources to do so.。Second, software developers have spent decades and billions of dollars writing code for Windows that runs on the x86 computing architecture used by both Intel and AMD.。Computer code built for x86 chips will not automatically run on Arm-based designs, and this transition process will be more challenging。