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For Microsoft (MSFT) , blue is the new green.
And we're not talking about just any old shade of blue, mind you.
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The software giant is going all in on Azure, which in addition to being the color of the sky also happens to be the name of the company's cloud-services platform.
Microsoft touted Azure's success within the tech titan's fiscal-third-quarter earnings report, which blew past Wall Street earnings estimates of revenue and profit, largely thanks to rising adoption of artificial intelligence.
Azure revenue rose 33% year over year in the quarter. AI contributed 16 percentage points to Azure's growth, up from 13 points in the previous quarter.
Related: Analysts reset Microsoft stock target amid post-earnings rally
"Cloud and AI are the essential inputs for every business to expand output, reduce costs and accelerate growth," Chief Executive Satya Nadella told analysts during the earnings call.
"When it comes to cloud migrations, we saw accelerating demand with customers in every industry from Abercrombie & Fitch to Coca-Cola and ServiceNow, expanding their footprints on Azure," he said.
Fund manager cites Microsoft cloud and AI strength
Looking ahead, MSFT expects continued growth in cloud and AI services, with Azure growth projected at 34% to 35% despite potential "AI capacity constraints beyond June," according to Amy Hood, Microsoft’s chief financial officer.
"We can tie the upside surprise in the March quarter as well as the sequential improvement for the current one back to Microsoft’s Azure and other cloud services business," said Chris Versace, lead portfolio manager for TheStreet Pro Portfolio.
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"When we stand back and look at Microsoft’s March quarter and its guidance, the message to walk away with is the strength in AI and cloud that permeates across multiple business lines," Versace said in his TheStreet Pro column. The AI and cloud businesses are "still somewhat capacity-constrained [but are] strong enough to more than offset the near-term uncertainty in the company’s hardware business."
Versace said that 12 months from now, "we see [Microsoft] even better positioned as AI adoption across the enterprise continues."
"Catalysts that will drive MSFT shares toward our $480 stock price include further confirmation that Azure is monetizing," he said.
There's a lot of monetizing going on in the cloud business.