Microsoft's capital expenditure surged 79% year over year to reach $14 billion, a growth rate not seen since 2016.
The Zhitong Finance App learned that the financial report released by Microsoft (MSFT.US) on Thursday showed that its capital expenditure surged 79% year over year to reach 14 billion US dollars, a growth rate not seen since 2016. However, despite investing huge sums of money, Microsoft still feels undersupplied in data center infrastructure, especially infrastructure to deploy artificial intelligence models.
Microsoft CFO Amy Hood told analysts during an earnings call: “Our demand actually slightly exceeds supply.” Microsoft needs more and more computing power to handle complex workloads in its products and integrate human-like generative artificial intelligence capabilities. This wave of demand was sparked by OpenAI and its ChatGPT chatbot, and Microsoft later integrated assistant functions into Teams messaging apps, Bing search engines, and other services to help users summarize meeting notes, write emails, and interpret online information.
Furthermore, Microsoft isn't the only AI company facing hardware supply challenges. As the main processor developer for generative artificial intelligence models, Nvidia (NVDA.US) has also been plagued by supply restrictions for a long time, and its revenue has doubled for several consecutive quarters. Now, as one of Nvidia's main customers, Microsoft is also beginning to feel supply pressure.
In the third fiscal quarter, Microsoft's Azure cloud service revenue increased by 31%, of which the artificial intelligence business contributed 7 percentage points of growth. Hood pointed out that production capacity issues have begun to affect the performance of artificial intelligence and may affect the fourth fiscal quarter. Supply restrictions have reduced Microsoft's ability to rent to customers to deploy artificial intelligence models.
As the key to Microsoft's future growth, Azure contributes tens of billions of dollars to Microsoft's revenue every quarter, growing faster than most other divisions of the company. In competition with Amazon Web Services, artificial intelligence services in Azure stand out, successfully attracting new customers.
It is worth mentioning that Microsoft's GitHub programming platform has also attracted much attention. The number of customers reached 1.8 million this quarter, up from 1.3 million in the previous quarter. Powered by OpenAI's large language model, AI coding assistants help simplify developers' work by predicting lines of code, answering questions, and translating code from one programming language to another. Business subscribers range from small startups to large businesses such as Goldman Sachs Group, Ford Motor Company, and Ernst & Young.
Hood revealed that capital expenditure will “increase dramatically” this quarter, mainly for cloud infrastructure construction, and called for a further increase in capital expenditure in the new fiscal year starting July 1 to “expand the scale to meet the growing demand for our cloud and artificial intelligence products.”