Microsoft beat fourth-quarter revenue and profit expectations on Tuesday as its cloud division benefited from product updates utilizing fresh artificial intelligence (AI) technology.

However, when it constructed new data centers to serve AI, expenditures increased significantly from the prior quarter, and its shares decreased somewhat in after-hours trading.

Wall Street is examining how Microsoft, which took the lead early on with investments in OpenAI, owner of the well-known ChatGPT service, may profit from generative AI services.

The $30 a month “Copilot” for its Microsoft 365 service, which can condense a day’s worth of emails into a brief update, is one example of how Microsoft is incorporating AI into its own products. Additionally, it wants to sell cloud computing services that other businesses might use to develop AI products.

According to Microsoft’s financial data, significant investments in AI services have surpassed corresponding revenue growth.

Microsoft’s quarterly capital expenditures reached the highest single-quarter total since at least its fiscal 2016 year, despite the fact that the growth rate of its Azure sales was somewhat higher than anticipated by the market. The firm is competing with other cloud providers for a finite number of Nvidia Corp. chips, whose graphics processing units are necessary for developing AI goods and services.

The company’s spending reflects its projections for demand for AI services, according to Brett Iversen, vice president of investor relations at Microsoft, who spoke to Reuters.

“You’ve seen a ton of excitement and customer interest in our various AI offerings, and that informs the CapEx spend that we need to do to build out the capacity to deliver against all of that.”

In the fiscal fourth quarter that ended on June 30, revenue increased to $56.2 billion, exceeding the analysts’ consensus forecast of $55.5 billion, according to Refinitiv. Above expectations of $2.55 per share, net income was $2.69 per share.

In contrast to forecasts of $23.8 billion, Microsoft’s Intelligent Cloud division, which houses the Azure cloud computing platform, saw an increase in revenue to $24 billion.

Revenue from Azure increased 26%, above Visible Alpha’s prediction of 25.2% growth.

The portion of Microsoft’s business that is most positioned to benefit from the increasing interest in AI is Azure, although the company does not break out the absolute sales figure for Azure.

Sales of the company’s Windows operating system fell to $13.9 billion as a result of the ongoing PC market downturn. According to Refinitiv, this contrasts with the experts’ consensus forecast of $13.6 billion.

According to Refinitiv statistics, the Microsoft division that includes the LinkedIn social network and its Office productivity software saw growth to $18.3 billion, exceeding analysts’ consensus estimates of $18.1 billion.

After the corporation informed investors that spending would increase as it built out data centers for AI work, capital expenditures increased to $10.7 billion from $7.8 billion in the fiscal third quarter.

In a statement releasing the findings, Chief Executive Satya Nadella remarked, “We remain focused on leading the new AI platform shift.”

Microsoft has begun incorporating AI capabilities into a variety of its products, including Azure, Microsoft 365, GitHub, and a number of developer tools.