Microsoft’s AI Ambitions: Will Quarterly Earnings Report Bring Good News?
As the tech industry continues to ride the artificial intelligence wave, Microsoft’s stock price has been lagging behind its peers. With a mere 8% increase in the past year, the software giant’s growth is the weakest among the eight U.S. tech megacap companies. In contrast, Apple has seen a 19% increase, Alphabet a 26% rise, and Tesla a staggering 117% surge.
Azure Cloud-Computing Business Under Scrutiny
The biggest question on investors’ minds is whether Microsoft’s Azure cloud-computing business will show accelerating growth. In October, the company attributed a delay in Azure services to a third-party provider, leading to a 6% stock slip. Since then, Azure growth has increased by only 2 percentage points, while top rivals Amazon and Alphabet have seen cloud growth accelerate by 7 and 13 points, respectively.
Capital Expenditures Reach Tens of Billions
Microsoft’s quarterly capital expenditures have reached tens of billions of dollars to meet cloud and AI needs. This significant investment has raised concerns about the company’s ability to generate returns. However, analysts expect revenue growth of 11% to $68.8 billion, with earnings per share increasing to $3.11 from $2.93 a year ago.
OpenAI Partnership: A Game-Changer?
Microsoft’s partnership with OpenAI, the creator of ChatGPT, has been a driving force behind the AI boom. With a nearly $14 billion investment in OpenAI, Microsoft has secured a significant amount of cloud business. However, the partnership has changed, with OpenAI no longer using Azure exclusively. This shift could help Microsoft reaccelerate Azure growth, according to analysts at Cowen.
AI Investment: A Long-Term Bet
Portfolio manager Kevin Walkush believes that Microsoft’s AI investment will pay off in the long run. “If AI doesn’t show up, there’s still a long runway for cloud,” Walkush said. “But I think the chance of AI showing up is really high, so that’s the bet I’m willing to let them make to take advantage of this opportunity.”
Quarterly Earnings Report: What to Expect
As Microsoft kicks off tech earnings season, investors will be watching closely for signs of growth acceleration. Will the company’s quarterly earnings report bring good news, or will it continue to lag behind its peers? One thing is certain: Microsoft’s AI ambitions are a long-term bet that could have significant implications for the company’s future growth.
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