April 29 (Reuters) – Microsoft’s cloud revenue growth increased in the March quarter while its spending rose less-than-expected as the software giant looks to convince investors that its big bet on artificial intelligence would pay off.
Capital expenditure rose 49% to $31.9 billion in the company’s fiscal third quarter, the company said on Wednesday, compared with Wall Street expectations of $34.90 billion, according to Visible Alpha. Spending had totaled $37.5 billion in the second quarter.
Revenue at the Azure cloud-computing unit jumped 40% in the period, faster than the 39% growth in the previous three months. That was in line with a consensus estimate of 40%.
The results could ease fears that sluggish adoption of its Copilot 365 assistant for businesses and a heavy reliance on OpenAI may have chipped away Microsoft’s early lead in the AI race.
It may also help justify data-center spending that has strained cash flows, with major cloud players on track to spend more than $600 billion on AI infrastructure this year.
To sharpen its competitive edge, Microsoft has aggressively added Anthropic’s technology to its cloud service and products like Copilot amid rising demand for the Claude creator’s models.
The expanded AI model options helped the company land on Monday its biggest-ever roll-out of Copilot, covering roughly 743,000 Accenture employees – a majority of the IT firm’s workforce.
Earlier this week, Microsoft also overhauled its OpenAI deal to lock in its 20% cut of the startup’s revenue through 2030 regardless of whether it achieves technological breakthroughs.
But the new arrangement also strips Microsoft of exclusive rights to resell OpenAI’s products on its cloud, just as competition heats up from Alphabet and Amazon.
The e-commerce giant has already started offering OpenAI’s latest models and Codex coding tool on its cloud.
The move could free up cloud capacity for Microsoft, which has blamed shortages for holding back revenue growth and used that to argue for its massive spending.
Funding those outlays has, however, forced companies to look for ways to cut costs. Microsoft earlier this month rolled out its first employee buyout program in more than five decades.
Amazon and Meta have also announced job cuts affecting thousands of employees.
(Reporting by Aditya Soni in Bengaluru; Editing by Sriraj Kalluvila)
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