Microsoft’s Earnings Report Anticipated as Company Trails Peers in Artificial Intelligence Boom
Microsoft, led by CEO Satya Nadella, is set to report its quarterly earnings Wednesday, amidst the company’s continued involvement in the artificial intelligence boom. However, investors have been underwhelmed by the software giant’s recent performance, with its stock price rising less than 8% in the past year, a stark contrast to its peers. This marks the weakest gain among the eight US tech megacap companies.
The company’s Azure cloud-computing business is a key area of concern for investors, as it trails its top rivals Amazon and Alphabet in terms of growth. Despite Finance Chief Amy Hood’s projection of 31-32% growth in Azure’s growth rate for the December quarter, investors are looking for acceleration in this area.
Microsoft’s relationship with ChatGPT creator OpenAI has been a significant driver of its growth in the past, but a recent change in this partnership has sparked concerns. OpenAI will no longer use Azure on an exclusive basis, and Microsoft will no longer guarantee access to the cloud service for OpenAI’s needs. This shift has raised questions about Microsoft’s ability to continue driving growth in the cloud and AI sectors.
Analysts are expecting Microsoft to report revenue growth of 11% year-over-year to $68.8 billion, the slowest year-over-year growth for any quarter since mid-2023. Despite these concerns, many analysts remain optimistic about Microsoft’s long-term prospects, particularly with regards to its AI investments. The company has committed to $80 billion in AI-related capital expenditures in the year ending June 30, and analysts believe that this investment will pay off in the long run.