Sawt Falasteen - Microsoft profit rises but cloud business misses mark

Microsoft revenue grew to $69.6 billion and the amount of money taken in by its "intelligence cloud" unit climbed to $25.5 billion but the market had expected more.

Shares slipped slightly in after-market trades.

Microsoft chief executive Satya Nadella spotlighted the tech titan's artificial intelligence investments in the earnings release, saying the company is "innovating across our tech stack" to unlock the ability for customers to make money from artificial intelligence offerings.

Nadella said Microsoft's AI business is on pace to bring in more than $13 billion annually in a near tripling of the rate a year earlier.

The Redmond-based company has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT.

The company has rolled out AI features at a furious pace, mainly under its Copilot brand, leaving investors hopeful for a return on investment from the expensive technology.

The company is on track to pump about $80 billion into artificial intelligence (AI) this fiscal year, according to Microsoft president Brad Smith.

Smith contended AI is poised to transform all aspects of life, and it is imperative that the United States be the global leader when it comes to the technology, he wrote in an online post.

"In many ways, artificial intelligence is the electricity of our age, and the next four years can build a foundation for America's economic success for the next quarter century," Smith said.

China and the United States are racing to spread their AI systems to other countries in an effort to become the de facto standard, according to Smith.

"The Chinese wisely recognize that if a country standardizes on China's AI platform, it likely will continue to rely on that platform in the future," Smith said.

The emergence of the DeepSeek chatbot has sent Silicon Valley into a frenzy, with calls to go faster on advancing artificial intelligence and beat communist-led China before it is too late.

Despite US government efforts to maintain AI supremacy through export controls on advanced chips, DeepSeek has found ways to achieve comparable results using authorized, less sophisticated Nvidia semiconductors.

For its part, Microsoft is on pace to invest about $80 billion this year to build out AI datacenters, train AI models and deploy cloud-based applications around the world, according to Smith.

Microsoft's 2025 fiscal year ends at the close of June.

Microsoft rivals Amazon, Google and OpenAI have also been spending billions of dollars on AI even though it remains unclear how and when they expect to profit from those investments.

T.Khatib--SF-PST