Satya Nadella Says Azure Search, Also Used By ChatGPT, Is 'One Of The Fastest-Growing Services' For Microsoft

Author: Ananya Gairola | April 25, 2024 11:55pm

Microsoft Corp (NASDAQ:MSFT) CEO Satya Nadella addressed concerns about the demand environment for the company’s Azure cloud services during the third-quarter earnings call.

What Happened: During the call on Thursday, Nadella spoke about the strong demand for Azure, particularly in the field of artificial intelligence (AI). He noted that Azure has become a go-to platform for AI projects, which has significantly contributed to acquiring new customers.

He highlighted three trends Microsoft is observing in Azure from the demand perspective. “Some of the logos I even referenced in my remarks, our new Azure customers. So, that’s one. The second thing that we’re also seeing is AI just doesn’t sit on its own. So, AI projects obviously start with calls to AI models, but they also use a vector database.”

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He then spoke about the growth of adjacent services in Azure. “Azure Search, which is really used by even ChatGPT is one of the fastest-growing services for us. We have Fabric integration to Azure AI. And so, Cosmos DB integration. So, the data tier, the dev tools is another place where we are seeing great traction,” he said.

Nadella also mentioned the increasing migration to Azure and the continuous optimization cycle, which involves customers spending money on new projects, leading to “continuous” growth.

Microsoft’s third-quarter revenue increased by 17% year-over-year to $61.9 billion, beating the consensus estimate of $60.804 billion. The tech giant reported quarterly earnings of $2.94 per share, which also beat analyst estimates, according to the data from Benzinga Pro.

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Why It Matters: In February 2024, it was reported that Microsoft’s Azure cloud infrastructure was rapidly narrowing the gap with Amazon Web Services (AWS), the leading cloud service provider.

Analysts estimated that Azure, which has grown from half the size of AWS five years ago to approximately three-quarters of its size today, does not explicitly report revenue

In January this year, analysts predicted that Azure’s growth could accelerate slightly to 29%-30% year-on-year, with a clear revenue path to $95 billion within two years.

MSFT Price Action: At the time of writing, Microsoft shares were up 4.31% in the after-hours session at $416.25 after ending Thursday’s regular trading lower by 2.45%, according to Benzinga Pro.

Photo Courtesy: Wikimedia Commons

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

Posted In: MSFT