Microsoft’s Satya Nadella Discusses Growing Demand for Azure Services

During the third quarter earnings call, Microsoft Corp’s CEO, Satya Nadella, addressed the increasing demand for the company’s Azure cloud services, especially highlighting its role in artificial intelligence (AI) projects.

Azure’s AI Demand Surges
Nadella began by noting Azure’s significant role as a key platform for AI projects, which has notably helped in attracting new clients. He outlined three main trends currently observed in Azure from a demand perspective. “Some of the logos I mentioned in my remarks are our new Azure clients. That’s the first point. Secondly, AI does not operate in isolation. Thus, AI projects start with calls to AI models but also involve a vector database,” he explained.

He further discussed the growth of adjacent services within Azure. “Azure Search, used by ChatGPT among others, is one of our fastest-growing services. We’ve integrated Fabric into Azure AI, as well as Cosmos DB integration. So, data layers and development tools are other areas where we’re seeing significant traction,” Nadella added.

He also spoke about the ongoing migration to Azure and a continuous optimization cycle, which involves customers investing in new projects, leading to “sustained” growth.

Financial Highlights
Microsoft’s third-quarter revenue increased by 17% year over year to $61.9 billion, surpassing the consensus estimate of $60.804 billion. The tech giant reported quarterly earnings of $2.94 per share, also exceeding analysts’ expectations, according to data from Benzinga Pro.

Closing the Gap with AWS
In February 2024, it was reported that Microsoft’s Azure cloud infrastructure was rapidly closing the gap with Amazon Web Services (AWS), the leading cloud service provider. Analysts estimated that Azure, which was about half the size of AWS five years ago, has now grown to roughly three-quarters of its current size. However, exact revenue figures for Azure are not explicitly reported.

In January this year, analysts forecasted that Azure’s growth might slightly accelerate to 29-30% year over year, with a clear revenue path towards $95 billion in the next two years.

Microsoft Stock Movements
Microsoft shares saw an increase of 4.41% in the after-hours session to $416.65 after closing down 2.45% during Thursday’s regular session, as per Benzinga Pro.