The company led by CEO Satya Nadella said sales in the January to March period rose by 17 percent from a year earlier to $61.9 billion, with net profit up by 20 percent to $21.9 billion.

The results were cheered by Wall Street investors who pushed up the share price by about four percent in after hours trading, consolidating Microsoft's position as the world's biggest company by market capitalization.

Microsoft has been hugely rewarded by investors since it aggressively pushed into rolling out generative AI, starting with its $13 billion partnership with OpenAI, the creator of ChatGPT in 2023.

The company has made its Copilot AI chatbot available as an add-on to some of its key products such as Office 365, and the coding assistant GitHub.

The embrace of AI has boosted sales of its key cloud services, such as Azure, which have become the core of Microsoft's business under Nadella's leadership.

Microsoft said that overall cloud service revenue increased 24 percent driven by Azure that saw revenue growth of 31 percent.

Cloud giants Amazon and Google are also looking to beef up cloud sales by rolling out AI features to clients and prove that the AI revolution is more than just hype.

In its push, Microsoft has moved beyond OpenAI and signed partnerships with other promising AI startups such as Mistral AI, as well as investing heavily internationally.

In March, Microsoft also announced that it hired DeepMind AI and Inflection AI co-founder Mustafa Suleyman to lead up its AI unit, poaching one of the industry's key figures from a promising startup.

- 'Next gear' -

The succession of moves has often taken archrival Google by surprise and seen Microsoft pip Apple as the world's biggest publically traded company.

"We believe Redmond is just starting to hit its next gear of growth with ChatGPT and AI also adding a new layer of growth to the Microsoft story over the coming years," said Wedbush Securities analyst Dan Ives.

Facebook-owner's Meta's results on Wednesday however were a first sign of AI fatigue after the social media giant warned that making money on the technology would take years.

Meta's stock nosedived by nearly 12 percent on Thursday, dragging AI players Microsoft and Google in the day's trading, though this was reversed after the markets closed.

Another potential dark cloud for AI are government regulators that are taking a closer look at Microsoft's ties with OpenAI and others amid fears that the giant is using its huge financial war chest to thwart the emergence of rivals.

Britain's competition watchdog on Wednesday was the latest to begin examining tie-ups between artificial intelligence firms and their US big tech partners, including Microsoft.