{"slug": "microsofts-cloud-unit-accelerates-to-fastest-growth-since-2022", "title": "Microsoft’s cloud unit accelerates to fastest growth since 2022", "summary": "Microsoft's Azure cloud revenue rose 43% in the fiscal fourth quarter, the fastest growth since early 2022, topping analysts' estimates of 40%. CFO Amy Hood said growth will accelerate to about 45% in the current quarter as demand exceeds supply, and capital expenditures hit $41 billion, up 70%.", "body_md": "# Microsoft’s cloud unit accelerates to fastest growth since 2022\n\nAzure cloud revenue rose 43% in its fiscal fourth quarter\n\nMICROSOFT’S cloud unit grew at the fastest clip in four years and the pace is accelerating, suggesting the company’s AI and computing services are making inroads with customers.\n\nAzure cloud revenue rose 43 per cent during the fiscal fourth quarter, the company said on Wednesday in a statement. That was the fastest quarterly growth since early 2022 and topped analysts’ average estimate for a 40 per cent increase. Azure revenue surpassed US$100 billion for the first time during the fiscal year ended in June.\n\nChief financial officer Amy Hood said she expected growth in the cloud unit to accelerate further in the current quarter, to about 45 per cent. “Demand continues to exceed available supply,” she said during a conference call with analysts.\n\nShe also indicated that Microsoft would hold the line on new capital spending this year, which helped send the shares up about 8 per cent in extended trading. The stock had fallen about 19 per cent this year through Wednesday’s close amid concerns about the massive outlays.\n\nSince ushering in the artificial intelligence boom with partner OpenAI, Microsoft has shifted its focus to AI models and software capable of acting autonomously. These products require enormous computing power, and the company has joined an industrywide spending frenzy to build new data centres and buy the chips required to handle AI services.\n\nCapital expenditures — a key metric of data centre spending — increased 70 per cent to US$41 billion in the quarter. Analysts had expected US$42 billion.\n\nHood said the company had determined that its data centres and office buildings would likely prove useful for an additional 10 years, a change that will shift some of the company’s capital expenditures to operating costs.\n\nThe net effect: Microsoft’s capital spending will likely land at roughly US$175 billion this year, versus a prior forecast of US$190 billion. But outside of that accounting tweak, the company’s 2026 investment expectations “remain unchanged”, Hood said.\n\nThat could ease investor concerns about the company’s massive outlays on data centres and chips even as investors continue to question the spending by some of Microsoft’s peers.\n\nGoogle parent [Alphabet last week raised its spending outlook](https://www.businesstimes.com.sg/companies-markets/alphabet-hikes-spending-outlook-race-build-ai-data-centres), and Meta Platforms on Wednesday [increased the low end of its own forecast for capital expenditures](https://www.businesstimes.com.sg/companies-markets/meta-gives-lacklustre-quarterly-sales-forecast-shares-drop). Both saw their shares fall. Amazon.com, which is also spending heavily on data centres, is scheduled to report financial results on Thursday.\n\nMicrosoft chief executive officer Satya Nadella said the company now counted more than 30 million paid users of Microsoft 365 Copilot, the AI assistant sold as an add-on to the ubiquitous Office software. That’s up from roughly 20 million three months earlier.\n\nThe step-up in paid Copilot users is a good result, Bloomberg Intelligence analyst Mandeep Singh said in an interview on Bloomberg TV. “The bundling strategy that Microsoft has continues to work.”\n\nTotal revenue increased 18 per cent to US$90 billion, beating average estimates for US$87.7 billion. Profit was US$4.81 per share, compared with a per-share estimate of US$4.25. That included a 33 cents-a-share boost from the value of the Microsoft’s investment in AI lab Anthropic PBC. BLOOMBERG\n\nDecoding Asia newsletter: your guide to navigating Asia in a new global order. 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