“We believe Microsoft will be the most important earnings report and conference call (Apple being no. 2) in all of earnings season, regardless of sector,” Ives wrote in a note to investors on Sunday. Microsoft will have “all the eyes of the Street globally tuned in with popcorn in hand.”

So how did the tech giant fare? Its corporate customers are spending big on AI. In the quarter that ended on Dec. 31, Microsoft reported revenue of $62 billion, an increase of 18% year over year (up 16% in constant currency). This came in above Wall Street’s expectations of $61.14 billion. Net income was $21.9 billion, increasing 33% (26% non-GAAP, and 23% in constant currency), according to the firm’s earnings report released on Tuesday.

Looking at Microsoft Intelligent Cloud, the segment that includes server products and cloud services, such as Azure, revenue was $25.9 billion—up 20% (up 19% in constant currency) from the same time a year ago. Generative AI services such as large language models like GPT-3 and GPT-4 are on Azure OpenAI Service. Microsoft has a multi-year, multibillion-dollar investment with OpenAI, the startup behind ChatGPT. 

“The most important metric will be Azure growth with the Street’s bogey of 27%, a very beatable number in our view given the level of activity we witnessed during the quarter from core MSFT enterprise customers heading to the cloud,” according to Ives. 

Microsoft Cloud offerings, including AI services, had “better than expected growth,” Microsoft EVP and CFO Amy Hood said on the earnings call. “Azure and other cloud services revenue grew 30% and 28% in constant currency, including six points of growth from AI services,” Hood said. During the quarter, there was an increase in the number of commitments to spend more than $1 billion on Azure, Satya Nadella, chairman and CEO of Microsoft, said on the call.

“We’ve moved from talking about AI to applying AI at scale,” Nadella said in a statement. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”

Following Microsoft’s earning’s call, on Tuesday night Ives gave his assessment: “This was another masterpiece quarter and guidance from Nadella that will send a major ripple impact across the tech world tomorrow as the AI Revolution is here.”

Sheryl Estrada
sheryl.estrada@fortune.com

Upcoming event: Fortune’s CFO Collaborative is an invitation-only group of CFOs from leading companies that meets virtually and in person for deep-dive discussions on what’s top of mind.

Next month, our topic will be “Determining the value proposition for GenAI.” In this intimate dinner discussion, scheduled for Feb. 28 in Houston and hosted in partnership with Workday and Deloitte, we’ll explore how companies can best capitalize on the AI Revolution and the operational and organizational changes required for businesses to incorporate GenAI. Join me and Fortune senior editor-at-large Geoff Colvin for a discussion with Niccolo de Masi, chairman of The Futurum Group, a global technology advisory, and leading CFOs from Houston and beyond.

It’s an invite-only event, but CFOs can apply to attend here. If you’d like more information, please send an email to: CFOCollaborative@Fortune.com

Leaderboard

Renee Gaeta was named CFO at Shockwave Medical, Inc. (Nasdaq: SWAV), a provider of technologies for the treatment of cardiovascular disease, effective Feb. 5. Renee succeeds Dan Puckett, CFO at Shockwave since 2016, who previously announced his decision to retire. Gaeta most recently served as CFO at Eko Health where she led both the finance and human resources teams. Before Eko Health, Gaeta was CFO and a member of the executive team at Establishment Labs Holdings, Inc.

Philip Moon was named CFO at Homebase, an HR and team management app. Moon previously worked with Morgan Stanley advising clients on mergers and acquisitions followed by investing roles at TPG and Empyrean Capital Partners. He was also previously strategic finance lead at Square, head of strategic finance at Eero, VP of strategic finance at Grove Collaborative, and most recently, head of finance at CloudTrucks.

Big deal

A new S&P Global Market Intelligence report takes a look at mergers and acquisitions deals in the global banking sector in 2023. Deals hit the lowest level for at least five years, a year marked by high interest rates and high-profile bank failures, according to the report. The deal count fell 32.6% year over year to 291, which includes whole bank deals, asset sales, and minority investments. 

Going deeper

"What really caused the sriracha shortage? 2 friends and the epic breakup that left millions without their favorite hot sauce," a new Fortune feature article by Indrani Sen, details how two men from different worlds came together to create an American icon. But after decades of partnership, it fell apart one day.

Overheard

"The velocity at which innovation is occurring across industry is already breathtaking—and, thanks to the continuing evolution of AI, it will only get faster. The key is assessing where your organization stands today, the direction you need to go, and the capital and human investments you need to make to get you there. The leaders who recognize this will be the ones best positioned to match that speed and seize the opportunities that continue to unfold." 

—Vimal Kapur, chief executive officer of Honeywell, writes in a Fortune opinion piece.