Microsoft reported quarterly results that impressed investors and showed how resilient the company is even as it spends heavily on AI.
Some investors were concerned about the company's aggressive spending on AI, while others demanded it. During the quarter, Microsoft reported that it spent $20 billion on capital expenditures, almost double what it spent in the same quarter last year.
However, the company satisfied both groups of investors as it revealed that it is still performing well in the short term amid those long-term investments. In the fiscal quarter, which ran from July through September, total revenue rose 16 percent year over year to $65.6 billion. Despite all that AI spending, profits also rose 11 percent.
Growth was largely driven by Azure and cloud services, where revenue increased by 33 percent. The company attributed 12 percent of that to AI-related products and services.
Meanwhile, Microsoft's gaming division continued to challenge long-standing assumptions that hardware is king, with Xbox content and services posting a 61 percent year-over-year revenue increase despite a 29 percent decline in hardware sales.
Microsoft is known to have moved away from the classic strategy of keeping software and services exclusive to the hardware, launching first-party games such as Sea of thieves not only on PC, but also on Sony's competing PlayStation 5 console. Compared to the Xbox, the PlayStation is dominant in sales and install base for this generation.
But don't make the mistake of assuming that a 61 percent increase in content and services revenue is solely due to Microsoft's Game Pass subscription service taking off. The company attributed 53 points of that to its recent $69 billion acquisition of Activision.
