European regulators may be gearing up for an antitrust investigation over Microsoft’s Teams bundling with Office software but it was hardly a talking point on Microsoft’s latest earnings call – with Redmond reporting net income of $18.3 billion for its fiscal Q3, up 9%, and Teams itself hitting 300 million monthly users.
(Microsoft may stop forcing Office customers to have Teams automatically installed, in a move designed to prevent an official antitrust probe by EU regulators, the FT reports, after a 2020 complaint by rival Slack, which alleged that “Microsoft has illegally tied its Teams product into its market-dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers”.)*
With quarterly revenue of $52.9 billion and earnings per share beating analysts expectations, it was a strong quarter for Redmond (which continues to boost capex as it builds out more infrastructure; that figure hit $7.8 billion “to support cloud demand”). Here are some other key takeaways from Microsoft’s Q3 2023 earnings call.
Azure OpenAI customer numbers surge
Microsoft hit 2,500 enterprise customers for Azure OpenAI, including Mercedes-Benz and Shell, less than three months after launching an API to the large language model developed by OpenAI.
Challenged on trust and accuracy issues, CEO Satya Nadella told analysts: “We have a Chief AI Officer who is responsible for both thinking of what the standards are and then the people who help us internally audit our… process. We feel very, very good in terms of us being able to create trust in the systems we put out there. And so we will obviously engage with any regulation that comes up in any jurisdiction. But quite honestly, we think that the more there is any form of trust as a differentiated position in AI, I think we stand to gain from that.”
Azure continued to perform strongly for Microsoft (up 31% in constant currency) although, as with other clouds, customers “continued to exercise some caution as optimization and new workload trends from the prior quarter continued” – executives also emphasised on the call that Azure Active Directory is finally beginning to take off in a meaningful way, growing 33% with nearly 720,000 organizations now using Azure AD and pointed to consumer goods giant Unilever (a long-standing Microsoft shop) going “all in” on Azure this quarter.
AI powered code completion tool Copilot for Business meanwhile has secured 10,000 enterprise customers, Microsoft also boasted, “including the likes of Coca-Cola and GM as well as Duolingo and Mercado Libre, all of which credit Copilot with increasing the speed for their developers. We're also bringing next-generation AI to Power Platform so anyone can automate workflows, create apps or web pages, build virtual agents and analyze data using only natural language” executives said on the earnings call, late Tuesday April 25.
Nadella added: "As we look towards a future where chat becomes a new way for people to seek information, consumers have real choice in business model and modalities with Azure-powered chat entry points across Bing, Edge, Windows and OpenAI’s ChatGPT. We look forward to continuing this journey in what is a generational shift in the largest software category, search" -- a move that is gaining exceptional steam despite the ongoing challenges around even the very latest iterations of LLMs "hallucinating" false statements or inaccurate code.