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Microsoft CEO Satya Nadella, left, departs from federal court in Washington, D.C., on Oct. 2, 2023.

Nathan Howard | Bloomberg | Getty Images

Microsoft shares moved as much as 2% lower in extended trading on Tuesday after the software maker issued fiscal second-quarter results that outdid analysts’ estimates and a light quarterly revenue outlook.

Here’s how the company performed, compared with consensus among analysts polled by LSEG, formerly known as Refinitiv:

  • Earnings: $2.93 per share, vs. $2.78 per share expected
  • Revenue: $62.02 billion, vs. $61.12 billion expected

With respect to guidance, Microsoft called for fiscal third-quarter revenue between $60 billion and $61 billion, or $60.50 billion at the middle of the range. Analysts polled by LSEG had expected $60.93 billion. But the company sees lower than expected cost of revenue and operating expenses during the quarter, based on consensus among analysts polled by StreetAccount.

Microsoft’s revenue increased 17.6% year over year in the quarter, which ended on Dec. 31, according to a statement. Net income, at $21.87 billion, or $2.93 per share, increased from $16.43 billion, or $2.20 per share.

The company’s Intelligent Cloud segment produced $25.88 billion in revenue, up 20% and above the $25.29 billion consensus among analysts surveyed by StreetAccount. The grouping contains Azure cloud infrastructure, SQL Server, Windows Server, Nuance, GitHub and enterprise services.

Within that segment, revenue from Azure and other cloud services grew 30%. Analysts polled by CNBC had expected 27.7% growth, and the StreetAccount consensus was 27.5%. The metric for the previous quarter was 29%. Six points of the Azure and other cloud services growth were tied to artificial intelligence, Amy Hood, Microsoft’s finance chief, said on a conference call with analysts.

Microsoft now boasts 53,000 Azure AI customers, and one-third of them are new to Azure in the past year, CEO Satya Nadella said on the call.

The number of commitments to spend in excess of $1 billion on Azure overall increased during the quarter, Nadella said.

Revenue from the Productivity and Business Processes unit including Office productivity software, LinkedIn and Dynamics totaled $19.25 billion. That was up 13% and higher than the $18.99 billion StreetAccount consensus.

The More Personal Computing segment contributed $16.89 billion in revenue, up about 19% and slightly more than the StreetAccount consensus of $16.79 billion. The segment comprises Windows, Surface, Bing and Xbox.

During the fiscal second quarter, Microsoft closed its acquisition of video game publisher Activision Blizzard, its largest deal ever. The company also announced custom cloud chips and started selling a $30 monthly Copilot AI add-on to Microsoft 365 productivity software bundles. But Nadella and Hood stopped short of sharing the number of clients that have started paying for the Copilot service.

“While it’s early days for Microsoft 365 Copilot, we’re excited about the adoption to date and continue to expect revenue to grow over time,” Hood said.

And layoffs continued in the quarter. Microsoft’s LinkedIn subsidiary cut around 700 jobs in October on top of the 10,000 announced earlier in the year. Last week, Microsoft said it’s eliminating around 1,900 employees in its gaming unit, or about 9% of headcount, following the Activision deal.

Notwithstanding the after-hours move, Microsoft shares have risen about 9% so far in 2024, while the S&P 500 index has gained 3% over that stretch.

WATCH: Microsoft briefly surpasses $3 trillion in market cap

Microsoft briefly surpasses $3 trillion in market cap

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The UK wants to do its ‘own thing’ on AI regulation, suggesting a divergence from U.S. and EU

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The UK wants to do its 'own thing' on AI regulation, suggesting a divergence from U.S. and EU

Jaque Silva | Nurphoto | Getty Images

LONDON — The U.K. says it wants to do its “own thing” when it comes to regulating artificial intelligence, hinting at a possible divergence from approaches taken by its main Western peers.

“It’s really important that we as the U.K. do our own thing when it comes to regulation,” Feryal Clark, Britain’s minister for AI and digital government, told CNBC in an interview that aired Tuesday.

She added the government already has a “good relationship” with AI companies like OpenAI and Google DeepMind, which have voluntarily opened their models up to the government for safety testing purposes.

“It’s really important that we bake in that safety right at the beginning when models are being developed … and that’s why we’ll be working with the sector on any safety measures that come forward,” Clark added.

UK can do its 'own thing' on AI regulation, minister says

Her comments echoed remarks from Prime Minister Keir Starmer on Monday that Britain has “freedom now in relation to the regulation to do it in a way that we think is best for the U.K.” after Brexit.

 “You’ve got different models around the world, you’ve got the EU approach and the U.S. approach – but we have the ability to choose the one that we think is in our best interest and we intend to do so,” Starmer said in response to a reporter’s question after announcing a 50-point plan to make the U.K. a global leader in AI.

Divergence from the U.S., EU

However, so far, the U.K. is yet to confirm details on proposed AI safety legislation, instead saying it will consult with the industry before proposing formal rules.

“We will be working with the sector to develop that and bring that forward in line with what we said in our manifesto,” Clark told CNBC.

Chris Mooney, partner and head of commercial at London-based law firm Marriott Harrison, told CNBC that the U.K. is taking a “wait and see” approach to AI regulation even as the EU is forging ahead with its AI Act.

“While the U.K. government says it has taken a ‘pro-innovation’ approach to AI regulation, our experience of working with clients is that they find the current position uncertain and, therefore, unsatisfactory,” Mooney told CNBC via email.

One area Starmer’s government has spoken up on reforming rules for AI has been around copyright.

Late last year, the U.K. opened a consultation reviewing the country’s copyright framework to assess possible exceptions to existing rules for AI developers using artists and media publishers’ works to train their models.

Businesses left uncertain

Sachin Dev Duggal, CEO of London-headquartered AI startup Builder.ai, told CNBC that, although the government’s AI action plan “shows ambition,” proceeding without clear rules is “borderline reckless.”

“We’ve already missed crucial regulatory windows twice — first with cloud computing and then with social media,” Duggal said. “We cannot afford to make the same mistake with AI, where the stakes are exponentially higher.”

“The U.K.’s data is our crown jewel; it should be leveraged to build sovereign AI capabilities and create British success stories, not simply fuel overseas algorithms that we can’t effectively regulate or control,” he added.

Details of Labour’s plans for AI legislation were initially expected to appear in King Charles III’s speech opening U.K. Parliament last year.

However, the government only committed to establishing “appropriate legislation” on the most powerful AI models.

“The U.K. government needs to provide clarity here,” John Buyers, international head of AI at law firm Osborne Clarke, told CNBC, adding he’s learned from sources that a consultation for formal AI safety laws is “waiting to be released.”

“By issuing consultations and plans on a piecemeal basis, the U.K. has missed the opportunity to provide a holistic view of where its AI economy is heading,” he said, adding that failure to disclose details of new AI safety laws would lead to investor uncertainty.

Still, some figures in the U.K. tech scene think that a more relaxed, flexible approach to regulating AI may be the right one.

“From recent discussions with the government, it is clear that considerable efforts are underway on AI safeguards,” Russ Shaw, founder of advocacy group Tech London Advocates, told CNBC.

He added that the U.K is well positioned to adopt a “third way” on AI safety and regulation — “sector-specific” regulations that rules to different industries like financial services and health care.

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China considers selling TikTok U.S. operations to Musk, Bloomberg reports

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China considers selling TikTok U.S. operations to Musk, Bloomberg reports

Jakub Porzycki | Nurphoto | Getty Images

The Chinese government is considering a plan that would have Elon Musk acquire TikTok’s U.S. operations to keep the app from being effectively banned, Bloomberg News reported on Monday.

The contingency plan is one of several options China is exploring as the U.S. Supreme Court determines whether to uphold a law that calls for China-based ByteDance to divest TikTok’s U.S. business by Jan. 19, the report said, citing anonymous sources.

After that deadline, third-party Internet service providers would be penalized for supporting TikTok’s operations in the country.

Under the plan, Musk would oversee both X, which he currently owns, and TikTok’s U.S. business, Bloomberg said. However, Chinese government officials haven’t yet decided on whether it would proceed, the report said, noting that the plan is still preliminary.

It’s unclear whether ByteDance knows about the Chinese government’s plans and TikTok and Musk’s involvement in the discussions, the report said. Senior Chinese officials are debating contingency plans involving TikTok’s future in the U.S. as part of larger discussions about working with President-elect Donald Trump, the report added.

A TikTok spokesperson said in an email to CNBC, “We can’t be expected to comment on pure fiction.” X didn’t immediately respond to a request for comment.

Last week, the Supreme Court held oral arguments about the law potentially banning TikTok, which President Joe Biden signed in April. TikTok’s legal team argued that the law violates the free-speech rights of the millions of users in the U.S. while the U.S. government said that ByteDance’s ownership of TikTok poses a national security risk.

With the Supreme Court appearing to side with the government, TikTok could turn to Trump, when his second term begins on Jan. 20. Trump, who favored a TikTok ban during his first administration, has since flip-flopped on the matter. Late last month, he urged the Supreme Court to intervene and forcibly delay implementation of Biden’s ban to give him time to find a “political resolution.”

Trump’s rhetoric on TikTok began to turn after he met in February with billionaire Jeff Yass, a Republican megadonor and a major investor in ByteDance who also owns a stake in the owner of Truth Social, Trump’s social media company.

WATCH: SCOTUS hears TikTok ban case

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IAC approves spinoff of home improvement marketplace Angi

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IAC approves spinoff of home improvement marketplace Angi

Joey Levin, CEO of IAC.

Anjali Sundaram | CNBC

Barry Diller’s IAC said Monday that its board approved the spinoff of Angi, the home improvement marketplace the company acquired in 2017.

IAC said it expects the transaction to close in the second quarter of the year. The two companies will post their respective fourth-quarter results when IAC reports on Feb. 11. Angi was founded in 1995 as Angie’s List, which went public on the Nasdaq in 2011.

As part of the spinoff, IAC CEO Joey Levin will leave his role and become an advisor to the company. Levin will also take on a new role as Angi’s executive chairman, serving as the marketplace’s senior executive alongside CEO Jeff Kip, IAC said.

“Joey Levin has been an exemplary leader of IAC, creating significant value during his nearly decade-long tenure as IAC CEO,” Diller, IAC’s chairman, said in a statement.

Upon Levin’s vacancy, IAC will operate without a new CEO, the company said. IAC’s top execs will report directly to Diller, as will publisher Dotdash Meredith, the company’s largest business. The rest of IAC’s units will report to operating chief Christopher Halpin.

IAC has previously used no-CEO structures when reorganizing its businesses. Most recently, in 2013, then-CEO Greg Blatt stepped down from the role to become chairman of the newly formed Match Group division.

“Each of IAC and Angi has a vigorous future, and I expect to remain an active participant in both,” Levin said in a statement.

As part of the spinoff, IAC shareholders will get direct ownership of Angi, IAC said.

IAC first announced it was considering a spinoff of Angi in November. At the time, the company said Angi’s revenue declined 16% year over year to $296.7 million during the third quarter. The company attributed the slide to reduced sales and marketing spend, which led to a decrease in service requests and lower acquisition of new professionals.

IAC acquired Angie’s List in a deal valued at more than $500 million. It merged the site with HomeAdvisor, creating a new public company. Angi currently has a market cap of about $770 million, and IAC owns 85% of it.

The spinoff has been under consideration for several years, but IAC postponed the effort in 2019 as it completed the Match Group transaction. Match owns dating services including Tinder, Match and Hinge.

IAC has become known for incubating businesses and spinning them off into separate companies. It’s done the same with Expedia, Ticketmaster and LendingTree, among others.

WATCH: IAC CEO on M&A opportunities, spinoff from ANGI and AI

IAC CEO on M&A opportunities, spinoff from ANGI and AI

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