Zinger Key Points
- Microsoft analyst says it remains best-positioned to monetize robust AI secular tailwinds while capitalizing on first-mover advantage.
- He noted that Azure's constant currency growth of 31% in Q3 exceeded the guidance for a 28% increase.
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Software giant Microsoft Corp. MSFT reported Thursday after the market close strong third-quarter results, sending its stock higher.
On Cloud Nine: Microsoft attributed the strong quarterly performance, primarily to its Cloud business. “This quarter Microsoft Cloud revenue was $35.1 billion, up 23% year-over-year, driven by strong execution by our sales teams and partners,” CFO Amy Hood said in a statement.
Microsoft’s Azure public cloud and other cloud services saw both GAAP and constant currency revenue growth of 31%.
Speaking on the earnings call, CEO Satya Nadella said, “Azure again took share as customers use our platforms and tools to build their own AI solutions.” He also noted that more than 65% of the Fortune 500 now use Azure OpenAI service.
Commenting on the Azure performance, Piper Sandler’s Brent Bracelin said the 31% growth exceeded the guidance for a 28% increase and reinforced his bullish view that Microsoft remained “best-positioned to monetize robust AI secular tailwinds while capitalizing on a first-mover advantage.”
Bracelin estimated that Azure AI contributed over a $5 billion annualized run rate.
See Also: Best Artificial Intelligence Stocks
Ancillary Beneficiaries: Calling Snowflake, Inc. SNOW and MongoDB, Inc. MDB as “Azure upside derivatives to watch,” Bracelin said these two companies have the most indirect exposure to consumption activity trends across the Cloud Titan cohort.
“Majority of revenue for SNOW is consumption-based while about 66% of revenue mix for MDB is consumption-based,” he said.
Bozeman, Montana-based Snowflake is a data-as-a-service company — backed by Warren Buffett‘s Berkshire Hathway — offering a cloud-based data storage and analytics service and New York-based MongoDB is a provider of commercial support for the source-available database engine MongoDB.
In premarket trading on Friday, Snowflake rose 3.19% to $157.37 and MongDB climbed 3.55% to $379.13, according to Benzinga Pro data. Microsoft rallied 4.34% to $416.34.
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