Microsoft Q3 earnings: here’s how ChatGPT helped this quarter

Shares of Microsoft Corp (NASDAQ: MSFT) are up 5.0% in extended trading after the tech behemoth reported solid results for its fiscal third quarter.

Should you buy Microsoft stock?

Also a positive was Azure – the company’s cloud-computing platform that grew 27% in the recent quarter versus 26.2% expected.

The earnings print was more than sufficient for D.A. Davidson’s Gil Luria to reiterate his “buy” rating on the Microsoft stock. Speaking with CNBC, he said:

I’d say [buy MSFT here] since they beat on almost every revenue line in this report, indicating that enterprises are consolidating their spend around Microsoft. Azure is always key and they just beat expectations.

Luria sees upside in this tech stock to $325 that suggests another 12% gain on top of the after-hours price action.

Did ChatGPT help drive growth in Q3?

Interestingly, Microsoft noted a 13% annualised growth in “Search” attributed to its multi-billion-dollar investment in ChatGPT that it recently integrated into Bing. On “Closing Bell: Overtime”, Luria added:

That’s significant acceleration from last quarter. Incorporating ChatGPT into Bing is clearly driving growth in an environment where digital advertising is not growing. So, MSFT accelerating there is very notable.

Earlier this month, Samsung was reported considering replacing Google with “Bing” as the default search engine on its smartphones (read more). Versus the start of the year, Microsoft stock is now up roughly 20%.

Microsoft Q3 earnings snapshot

• Earned $18.3 billion versus the year-ago $16.8 billion
• Per-share earnings also climbed from $2.22 to $2.45
• Revenue jumped 7.0% year-on-year to $52.86 billion
• Consensus was $2.24 a share on $51.02 billion revenue

In Q3, Microsoft Corp topped estimates in all three of its businesses despite headwinds including a slowdown in personal computers and enterprise spend. The D.A. Davidson analyst concluded:

Device and Windows OEM declined less than last quarter meaning we have found the bottom. Windows is a very high margin business, so, it’s very good news for MSFT. Rest of the way for this year looks to be even better.

Microsoft stock is still down significantly from its all-time high in late 2021.