Microsoft reported earnings that exceeded expectations on Wednesday, driven by growth in its Azure cloud business, as five of the "Magnificent Seven" tech giants announce quarterly results this week. “AI-driven transformation is reshaping work, work artifacts, and workflow across every role, function, and business process, ” stated CEO Satya Nadella in a press release. “We are broadening our opportunities and acquiring new customers as we assist them in utilizing our AI platforms and tools to achieve new growth and operational efficiency. ” Attention was focused on Azure, Microsoft’s fastest-growing sector, which has attracted billions in investments as the company emphasizes artificial intelligence. Revenue from this division surged by 22%, according to the release. Meanwhile, Alphabet, Google’s parent company, revealed that its cloud business grew by nearly 35% year-over-year to $11. 35 billion, surpassing analyst predictions. Shares rose in after-hours trading. The company announced earnings per share of $3. 30, exceeding the anticipated $3. 10, with revenues of $65. 59 billion, ahead of the expected $64. 51 billion. As Microsoft invests in AI, its financial obligations have substantially increased. On Wednesday, the company reported over $108 billion in finance leases for data centers—essentially loans to finance new assets over time—for leases that have yet to commence. Alongside its increasing investments, Microsoft’s demand for electricity has soared in recent years.

The company is considering restarting Three Mile Island, the Pennsylvania nuclear power plant notorious for a partial meltdown in 1979, as part of a strategy to power its extensive data center operations. Three Mile Island generated power until its closure in 2019. Under the planned agreement, Microsoft intends to purchase the plant’s total electricity output over the next two decades. However, investors are growing cautious about the extensive AI investments of big tech companies, eager for a clearer understanding of when these investments will yield returns. Collectively, the seven firms—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—account for $12 trillion in market capitalization and nearly one-fifth of the S&P 500 but have underperformed the market over the last three months, collectively declining 3. 5% since early July. Wedbush analyst Dan Ives noted in a report to investors that this was a vital quarter for both Microsoft and Azure amid intensifying competition in the AI landscape. “Our evaluations of Microsoft have been favorable this quarter, as we firmly believe the company is well-positioned and enhancing its cloud deal flow for Azure, showing strong momentum extending into 2025 and beyond, ” Ives stated, referencing Microsoft’s headquarters in Washington state. “We maintain our ‘outperform’ rating. ”