Microsoft topped quarterly revenue expectations for its crucial cloud-computing business Wednesday, signaling that its hefty spending on artificial intelligence was paying off, easing worries about intensifying competition.

The company said revenue at its Azure cloud division grew 39% in the October-December period, its fiscal second quarter. That compares with a consensus estimate of 38.8%, according to Visible Alpha.

The Windows maker has long enjoyed a first-mover advantage in Big Tech's AI race thanks to its early bet on OpenAI, whose technology powers most of its offerings, including M365 Copilot.

But a strong reception for Google's latest Gemini model and the launch of autonomous agents, such as Anthropic's Claude Cowork, have posed risks both to Microsoft's AI business and the software offerings that have long been central to the company.

That has weighed on Microsoft's stock as investor doubts persist over whether Big Tech will deliver enough returns to make up for the AI spending. Collectively, Microsoft, Alphabet, Meta and Amazon are expected to spend more than $500 billion on AI this year.

Some analysts have said that mounting losses at OpenAI, in which Microsoft has a 27% stake, could drive up expenses as the company books its share of those losses.

Late October's major OpenAI restructuring gave Microsoft that stake. And while the overhaul included a commitment from OpenAI to buy $250 billion of Azure services, it also freed the ChatGPT creator to pursue cloud deals with other companies that could lower its reliance on Microsoft.

OpenAI has agreed to a $38 billion cloud deal with Amazon Web Services since then.