Microsoft's Q1 FY25 Earnings Showcase AI-Driven Growth and Cloud Dominance

Microsoft gaming revenue increases 61% as cloud and AI take center stage

Recap: Microsoft's revenue grew 16 percent year-over-year to $65.6 billion in Q1 FY25, surpassing consensus analyst projections of $64.5 billion. Operating income rose 14 percent to $30.6 billion, while net income increased by 11 percent, reaching $24.7 billion. Diluted earnings per share climbed 10 percent to $3.30. Key drivers of growth included cloud computing, AI, and gaming, even as traditional revenue streams like consumer software and hardware took a backseat. Microsoft's Intelligent Cloud division, encompassing Azure, grew 20 percent year-over-year to $24.1 billion, with the majority of gains from the commercial sector. Revenue from Microsoft 365 commercial products and cloud services increased by 13 percent, while consumer products and cloud services revenue rose a more modest five percent. A standout growth area this quarter was Xbox content and services, which surged by 61 percent YoY, largely due to the Activision acquisition. The gaming division also benefited from a price hike for Xbox Game Pass Ultimate and the release of Call of Duty: Modern Warfare III on Game Pass, both of which likely contributed to increased earnings. Search and news advertising revenue grew by 18 percent, while LinkedIn revenue increased by 10 percent. Windows OEM and Devices revenue saw a marginal two percent increase; although Windows OEM showed some actual growth, Devices revenue declined compared to the previous year. During the earnings call, CEO Satya Nadella emphasized Microsoft's commitment to AI, particularly in enhancing Copilot. He highlighted how the company is acquiring new AI customers by helping them "drive new growth and operating leverage." Nadella also announced that Microsoft's AI business is on track to exceed a $10 billion annual run rate this quarter. The last quarter was a mixed bag for Microsoft. While its Intelligent Cloud division, AI, and gaming businesses generated substantial revenue, there were notable PR setbacks, including a widespread CrowdStrike outage that led to 8.5 million Windows devices crashing worldwide. This was due to a faulty CrowdStrike update, which affected less than one percent of all Windows machines globally but still caused major issues for retailers, banks, airlines, and their customers.

Microsoft reports quarterly sales up 16pc to USD65.6B

AP - Microsoft on Wednesday reported its quarterly sales grew 16 per cent to USD65.6 billion as the company sought to assure investors its huge spending on artificial intelligence (AI) is paying off. The company has spent billions of dollars to expand its global network of data centres and other physical infrastructure required to develop AI technology that can compose documents, make images and serve as a lifelike personal assistant at work or home. As a result, AI-related products are now on track to contribute about USD10 billion to the company's annual revenue, the "fastest business in our history to reach this milestone", CEO Satya Nadella said on a call with analysts on Wednesday. The software maker also reported an 11 per cent increase in quarterly profit to USD24.7 billion, or USD3.30 per share, which beat Wall Street expectations for the July-September period. Analysts polled by FactSet Research were expecting Microsoft to earn USD3.10 per share on revenue of USD64.6 billion. Microsoft hasn't yet formally reported revenue specifically from AI products but said it has infused the technology and its AI assistant, called Copilot, into all of its business segments, particularly its Azure cloud computing contracts. Leading in sales for the quarter was Microsoft's productivity business segment, which includes its Office suite of email and other workplace products, growing 12 per cent to USD28.3 billion. Microsoft's cloud-focused business segment grew 20 per cent from the same time last year to USD24.1 billion for the three months ending on September 30. Its personal computing business, led by its Windows division, grew 17 per cent to USD13.2 billion. A big part of that growth came from Microsoft's Xbox video game business, which was boosted by its purchase of game publishing giant Activision Blizzard a year ago. Microsoft and the computer makers that run its Windows operating system also this year unveiled a new class of AI-imbued laptops as the company confronts heightened competition from Big Tech rivals in pitching generative AI technology to consumers and workplaces. Building and operating AI systems is costly and Microsoft reported spending USD20 billion over the quarter, mostly for its cloud computing and AI needs. That includes building energy-hungry computing centers and supplying them with specialised chips to train and run AI models.

Microsoft Cloud Fuels Stronger-Than-Expected Revenue Growth

(Bloomberg) -- Microsoft Corp.'s cloud-computing and Office software businesses fueled stronger-than-projected quarterly revenue growth, a sign that the company's hefty investments in artificial intelligence are starting to pay off. Sales in the first quarter, which ended Sept. 30, increased 16% to $65.6 billion, the company said in a statement Wednesday. Profit rose to $3.30 a share. Analysts on average estimated sales of $64.5 billion and per-share earnings of $3.11, according to Bloomberg data. The Azure cloud computing division posted a 34% revenue gain in the quarter, adjusted for currency fluctuations. That decelerated slightly from the 35% growth in the previous period but was ahead of Microsoft's earlier forecast, according to some analysts. Chief Executive Officer Satya Nadella has overhauled the software maker's product line with AI models from partner OpenAI. He's now seeking to recruit enough paying customers to the souped-up software and services to drive Microsoft's growth for years to come. At the same time, corporations are tapping the company's data-center capacity to power development of their own AI applications, buoying demand in its closely watched Azure business. "People are shifting from just talking about artificial intelligence and testing and piloting artificial intelligence to actually putting it into production," said Jackson Ader, an analyst at Keybanc. Microsoft shares gained about 1% in extended trading following the report. They had closed up less than 1% to $423.53 in New York. The stock fell 3.7% in the quarter compared with a 5.5% increase in the Standard and Poor's 500 Index, reflecting Wall Street concerns that Microsoft isn't yet realizing sufficient gains from its AI investments, and may risk falling behind as rivals pile into the market. The company's main sources of AI-related income fall into two categories -- cloud services and AI-enhanced productivity assistants baked into Office, which help workers summarize emails, transcribe conference calls and create slideshows. The company said 12 percentage points of Azure's growth was attributable to AI, compared with 11 points in the June quarter. Microsoft's overall cloud revenue, a mix of sales from products such as Office and Azure cloud sales, rose 22% to $38.9 billion. The results come a day after Alphabet Inc.'s Google posted quarterly cloud sales that grew more than analysts had projected, rising to $11.4 billion, a 35% increase from the year-earlier period. Like Amazon.com Inc. and Google, Microsoft has ramped up spending to construct and rent the data centers required to fuel power-hungry AI services. Capital expenditures, closely watched by investors as Microsoft embarks on this historic build-out, jumped to $55.7 billion in the fiscal year ended June 30. The company has forecast a further increase in the current year. Microsoft's AI electricity needs are so significant it struck a deal to purchase nuclear power from a restarted reactor at Three Mile Island. In July, Microsoft Chief Financial Officer Amy Hood forecast that Azure growth would continue to slow in the September quarter, but said investments in data centers would let the company capitalize on demand and accelerate Azure growth in the second half of fiscal 2025. Microsoft has been signing up corporate clients to use its AI-infused Office services, which carry a monthly list price of $30 per user, in addition to the cost of the basic Office product. Because of that expense, and because the products are still at an early stage of readiness, some clients have moved slowly with trials and deployments.

Microsoft AI Business Could Hit $10B, Gaming Up While Hardware Sales Fall

Microsoft's latest earnings call reveals the company is increasingly relying on its Cloud and AI businesses for future gains. Cloud revenue grew 22% year-over-year, and "Intelligent Cloud" saw a 20% bump as well. Microsoft's Cloud services include a range of cloud-hosted software solutions for businesses, including Microsoft Defender, Sentinel, Azure, AI, and other offerings. The Intelligent Cloud consists of server products and cloud services including GitHub cloud services and other cloud computing options. The company also believes its AI business may rise to $10 billion by mid-2025, according to a post from Microsoft Communications Lead Frank Shaw. Microsoft has been pushing AI across its enterprise products with upcoming launches like autonomous AI agents, and has released a line of Copilot+ PCs and released AI features like Recall this year. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," Microsoft Chairman and CEO Satya Nadella said in a statement. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage." Xbox games and subscriptions also saw a 61% boost, which Microsoft says was partially driven by its Activision Blizzard acquisition. But hardware sales are down 29% this quarter. Xbox has started opening up its games to more platforms, including to PCs, the PS5, and the Nintendo Switch, and Xbox hasn't released a new console in years. Most recently, Microsoft launched refreshes of the existing Series S and X this month, but the main advantage of the updated consoles is increased storage space. Microsoft sees AI as an integral part of its business, but all that AI computing means it'll need more data centers and power sources to fuel future growth. The company already has over 300 data centers around the world, and, like Google, plans to open nuclear plants to power its AI plans.

Microsoft's quarterly revenue is up 16% to $65.6 billion

At the same time, Microsoft showed little sign of slowing down its spending on building data centers for its AI work. The company spent $20 billion on capital expenditures, up 79% from a year earlier. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools," Satya Nadella, Microsoft's CEO, said in a statement.Microsoft on Wednesday reported financial results that could quell investor unease over its heavy spending on artificial intelligence. Sales from July through September hit $65.6 billion, up 16% from a year earlier. Profit rose 11%, to $24.7 billion. The results surpassed Wall Street's expectations and Microsoft's own predictions. At the same time, Microsoft showed little sign that it was putting the brakes on the blistering pace of its spending to build data centers for its AI work. The company spent $20 billion on capital expenditures, up 79% from a year earlier. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools," Satya Nadella, Microsoft's CEO, said in a statement. The company's executives had told investors that Microsoft expected sales to be constrained through the end of the year because its available data center capacity was not enough to meet customer demand. The company has bet heavily on artificial intelligence through its investments in the startup OpenAI. That relationship has given it "an enviable position as the vanguard of the new technology," and Microsoft is gaining share from competitors, analysts for Raymond James wrote in a note to investors. Since the summer of 2023, AI has helped stabilize the growth of Microsoft's flagship cloud computing service, Azure. This past quarter, Azure's growth held roughly steady at 34%, not including currency fluctuations. More than a third of that growth came from artificial intelligence, including selling access to OpenAI's systems and providing computing power when customers use OpenAI's directly from the startup. (The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to AI systems. The two companies have denied the suit's claims.) Investors were somewhat unsure about what to expect for the quarter, because in August, Microsoft said it was tweaking which products were included in certain metrics it reported. Microsoft's share price rose about 1.5% in after-hours trading Wednesday. Investors have been jittery about Microsoft's capital spending because they have "limited visibility" into whether and how the spending produces solid returns on the investments, analysts from Bank of America wrote in a recent note. The company does not disclose sales of its own AI assistants, which cost business customers $30 per month, but its overall Microsoft 365 commercial cloud revenue, which includes Excel, Team and Word, was up 15%.

Microsoft's Quarterly Revenue Is Up 16% to $65.6 Billion

Microsoft on Wednesday reported financial results that could quell investor unease over its heavy spending on artificial intelligence. Sales from July through September hit $65.6 billion, up 16 percent from a year earlier. Profit rose 11 percent, to $24.7 billion. The results surpassed Wall Street's expectations and Microsoft's own predictions. At the same time, Microsoft showed little sign that it was putting the brakes on the blistering pace of its spending to build data centers for its A.I. work. The company spent $20 billion on capital expenditures, up 79 percent from a year earlier. "We are expanding our opportunity and winning new customers as we help them apply our A.I. platforms and tools," Satya Nadella, Microsoft's chief executive, said in a statement. The company's executives had told investors that Microsoft expected sales to be constrained through the end of the year because its available data center capacity was not enough to meet customer demand. The company has bet heavily on artificial intelligence through its investments in the start-up OpenAI. That relationship has given it "an enviable position as the vanguard of the new technology," and Microsoft is gaining share from competitors, analysts for Raymond James wrote in a note to investors. Since the summer of 2023, A.I. has helped stabilize the growth of Microsoft's flagship cloud computing service, Azure. This past quarter, Azure's growth held roughly steady at 34 percent, not including currency fluctuations. More than a third of that growth came from artificial intelligence, including selling access to OpenAI's systems and providing computing power when customers use OpenAI's directly from the start-up. (The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The two companies have denied the suit's claims.) Investors were somewhat unsure about what to expect for the quarter, because in August, Microsoft said it was tweaking which products were included in certain metrics it reported. Microsoft's share price rose about 1.5 percent in after-hours trading on Wednesday. Investors have been jittery about Microsoft's capital spending because they have "limited visibility" into whether and how the spending produces solid returns on the investments, analysts from Bank of America wrote in a recent note. The company does not disclose sales of its own A.I. assistants, which cost business customers $30 per month, but its overall Microsoft 365 commercial cloud revenue, which includes Excel, Team and Word, was up 15 percent.

Cloud, business software and AI push sees Microsoft results hit new high

Microsoft's first-quarter figures for its 2025 financial year have exceeded expectations, but rather than having a positive impact on share prices, stock is down over future concerns. Q1 2025 revenue stood at $65.6 billion, marking a 16% increase and a $1 billion jump over prior Wall Street projections. Operating income was also up by 14% to $30.6 billion. However, despite the strong performance, company stock declined 4% in after-hours trading, likely as a result of slower-than-anticipated growth projections for the next three-month period. Company CEO Satya Nadella commented: "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," indicating that Redmond's cloud efforts are responsible for much of the ongoing growth. "Strong execution by our sales teams and partners delivered a solid start to our fiscal year with Microsoft Cloud revenue of $38.9 billion," said CFO Amy Hood. Microsoft Cloud's $38.9 billion in quarterly revenue marks a considerable 22% year-over-year increase. Besides its core cloud division, Microsoft noted that LinkedIn's revenue had increased 10% and Microsoft 365 Commercial products and cloud services had grown by 13% - these are two areas of the business that have been infused with artificial intelligence in recent months, following billions of dollars of investment by the firm. However, despite predicting continued growth to the tune of between $68.1 billion and $69.1 billion in the next financial quarter, shareholders have been stripped of confidence that the tech giant will continue to deliver such strong performance, leading stock to decline. Analysts had previously projected quarterly revenue of $69.83 billion - more than the upper end of Microsoft's latest expectation.

Microsoft's AI Business Surges, Set to Hit $10 Billion Milestone | PYMNTS.com

Microsoft's artificial intelligence (AI) initiatives are delivering unprecedented growth, with the company announcing its AI business is on track to surpass $10 billion in annual revenue run rate next quarter, marking the fastest acceleration to that milestone in the company's history. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process, helping customers drive new growth and operating leverage," CEO Satya Nadella told analysts during the company's fiscal first-quarter earnings call Wednesday (Oct. 30). The tech giant said its AI momentum is evident across its product portfolio, with Azure OpenAI Service usage more than doubling over the past six months. Major enterprises are rapidly adopting Microsoft's AI tools, with nearly 70% of Fortune 500 companies using Microsoft 365 Copilot, the company's AI-powered workplace assistant. Supply constraints remain a challenge as Microsoft works to meet surging demand for AI computing resources. "Demand continues to be higher than our available capacity," said Amy Hood, Microsoft's chief financial officer, noting that some AI capacity expected for the second quarter has shifted to the latter half of the fiscal year. The company is aggressively expanding its AI infrastructure globally, announcing new cloud and AI investments in Brazil, Italy, Mexico and Sweden. Microsoft is also diversifying its AI computing capabilities, offering "the broader selection of AI accelerators, including our first-party accelerator, Maya 100, as well as the latest GPUs from AMD and Nvidia," Nadella said. Microsoft's partnership with OpenAI continues to yield significant returns. "We have an economic interest in a company that has grown significantly in value, and we have built differentiated IP and are driving revenue momentum," Nadella noted. According to Hood, the company has invested $13 billion in OpenAI to date. Early enterprise adoption shows promising productivity gains. Nadella cited Vodafone as an example, which "will roll out Microsoft 365 Copilot to 68,000 employees after a trial showed that, on average, they saved three hours per person per week." The company is also seeing strong traction in specialized AI applications. Nadella highlighted that DAX Copilot, Microsoft's AI assistant for healthcare, is "now documenting over 1.3 million physician-patient encounters each month at over 500 healthcare organizations." Despite the rapid growth, Microsoft faces challenges in scaling its AI infrastructure. "DCs [data centers] don't get built overnight. So there is DC, there is power, and so that's sort of been the short term constraint," Nadella explained. However, he expressed confidence that "going into the second half of even this fiscal year, that some of that supply demand will match up." The company's AI-driven growth is part of a broader strong performance, with Microsoft Cloud revenue reaching $38.9 billion in the quarter, up 22% year over year. Microsoft shares closed up following the earnings announcement, reflecting investor confidence in the company's AI strategy and execution.

Microsoft beats expectations, but AI concerns force shares down

Microsoft delivered solid quarterly results on Wednesday, beating analyst expectations with revenue jumping 16 percent to $65.6 billion, but questions were raised about the company's big spending on the AI boom. During the quarter, Microsoft also returned $9.0 billion to shareholders through dividends and share repurchases, helping pump up share value.San Francisco, Oct 31, 2024 -Microsoft delivered solid quarterly results on Wednesday, beating analyst expectations with revenue jumping 16 percent to $65.6 billion, but questions were raised about the company's big spending on the AI boom. The tech giant reported net income of $24.7 billion for the quarter ending September 30, marking an 11-percent increase from the same period last year. Earnings per share rose 10 percent to $3.30. The company attributed the solid performance to robust growth in its cloud computing and artificial intelligence businesses. "AI-driven transformation is changing work... and workflow across every role, function, and business process," said Microsoft CEO Satya Nadella, adding that the company was winning new customers through its AI platforms and tools. The Redmond-based company has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT. The company has rolled out AI features at a furious pace, mainly under its Copilot brand, leaving investors hopeful for a return on investment from the expensive technology. But the tech giant warned that its gross margin outlook for its crucial cloud division, or how much money it expects to make, was going to be lower just as its investment in AI infrastructure was set to grow. The news sent Microsoft's share price down by nearly four percent in after-hours trading. "Microsoft's latest earnings came in a bit above expectations, but the results may leave some investors wanting more clarity," said Emarketer senior director Jeremy Goldman. "The true wildcard this quarter has been Microsoft's AI investments. It's pouring cash into building out infrastructure, with major capex implications. Yet, the revenue returns from AI remain more of a promise than a present reality," he added. Azure, Microsoft's cloud computing platform, saw strong growth with revenue increasing 34 percent, when adjusted for currency fluctuations. During the quarter, Microsoft also returned $9.0 billion to shareholders through dividends and share repurchases, helping pump up share value. With the jitters over Microsoft's massive outlays on AI, the company has trailed other tech giants on Wall Street this year, gaining just over 15 percent, while Meta has surged 70 percent and Amazon climbed nearly 30 percent. In a notable development, Microsoft's gaming division showed substantial growth, with Xbox content and services revenue surging 61 percent, primarily due to the recent Activision Blizzard acquisition, which contributed 53 percentage points to this increase. Google parent company Alphabet on Tuesday set the scene for the tech earnings season with a solid report, as its cloud computing division posted strong results on the back of AI adoption by search engine users.

Microsoft's revenue beats estimates on strong cloud demand from AI boom

Microsoft's quarterly revenue rose 16 per cent, driven by demand for cloud computing amid a boom in adoption of artificial intelligence tools. Revenue for its fiscal first quarter was $65.6bn, beating analysts' expectations for $64.5bn, according to a filing on Wednesday. Net income increased 11 per cent to $24.7bn in the three months through to the end of September, exceeding the average estimate of $23.1bn. "AI-driven transformation is changing work . . . across every role, function and business process," said chief executive Satya Nadella. He said the company was "winning new customers as we help them apply our AI platforms". Sales at Microsoft's closely watched cloud division, its biggest revenue driver that includes its Azure cloud computing platform, also beat forecasts, climbing 22 per cent from a year ago to $38.9bn. Microsoft has been one of the main beneficiaries of the mainstream adoption of AI, with surging demand for its Azure data centres and enthusiasm about its partnership with market leader OpenAI propelling it to become the world's third-most valuable public company. Its shares, which are up about 16 per cent year to date, rose 0.8 per cent in after-hours trading. At $3.3tn, Microsoft's valuation trails only those of Apple and Nvidia. Rival Google's stock price rose 4 per cent after it posted similarly strong growth in its cloud business on Tuesday.

Microsoft reports strong growth powered by AI, cloud

"AI-driven transformation is changing work...and workflow across every role, function, and business process," said Microsoft CEO Satya Nadella, adding that the company was winning new customers through its AI platforms and tools. Microsoft has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT.Microsoft delivered solid quarterly results on Wednesday, beating analyst expectations with revenue jumping 16 percent to $65.6 billion, driven by robust growth in its cloud computing and artificial intelligence businesses. The tech giant reported net income of $24.7 billion for the quarter ending September 30, marking an 11 percent increase from the same period last year. Earnings per share rose 10% to $3.30. "AI-driven transformation is changing work...and workflow across every role, function, and business process," said Microsoft CEO Satya Nadella, adding that the company was winning new customers through its AI platforms and tools. Microsoft has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT. The company has rolled out AI features at a furious pace, mainly under its Copilot brand, asking its cloud computing customers to upgrade to the new technology. "Microsoft's latest earnings came in a bit above expectations, but the results may leave some investors wanting more clarity," said Emarketer senior director Jeremy Goldman. "The true wildcard this quarter has been Microsoft's AI investments. It's pouring cash into building out infrastructure, with major capex implications. Yet, the revenue returns from AI remain more of a promise than a present reality," he added. Azure, Microsoft's cloud computing platform, saw strong growth with revenue increasing 34 percent, when adjusted for currency fluctuations. During the quarter, Microsoft also returned $9.0 billion to shareholders through dividends and share repurchases, helping pump up share value. Microsoft's share price was up slightly in after-hours trading. Google-parent Alphabet on Tuesday set the scene for a solid earnings season for big tech, as its cloud computing division posted strong results on the back of AI adoption by search engine users.

Microsoft sails as AI boom fuels double-digit growth in cloud business

Revenue from Azure cloud business increased by 22% as company focuses attention on artificial intelligence Microsoft reported better-than-expected earnings on Wednesday fueled by growth in its Azure cloud business, as five of the "Magnificent Seven" tech megacaps roll out quarterly earnings this week. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," the company's CEO, Satya Nadella, said in a press release. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage." All eyes were on Azure, Microsoft's fastest-growing division that has received billions of dollars of investment as the company focuses attention on artificial intelligence. Revenue from the division increased by 22%, according to a press release. A day earlier, Google's parent, Alphabet, reported that its cloud business grew nearly 35% from a year earlier to $11.35bn, beating analyst estimates. Shares rose in after-hours trading. The company reported $3.30 earnings per share, against an anticipated $3.10 per share, on revenue of $65.59bn, against an anticipated $64.51bn. As it has invested in AI, Microsoft's financial expenditures have grown significantly. On Wednesday, its finance leases for data centers - essentially loans to pay for new assets over time - are over $108bn for leases that haven't started yet. Growing in parallel to its ballooning investments, Microsoft's demand for electricity has shot up in recent years. The company is looking to restart Three Mile Island, the nuclear power plant in Pennsylvania famous for a partial meltdown in one of its reactors in 1979, as part of a project to power the tech giant's enormous fleet of data centers. Three Mile Island produced power until 2019, when it was shut down. Under the deal, Microsoft plans to purchase the plant's entire output of electricity over the next 20 years. But investors are growing wary of big tech's vast AI bet and hoping to receive a clearer picture of when the bet will begin to pay off. Between them, the seven companies - Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla - represent $12tn in market capital and a whopping one-fifth of the S&P 500, but the group has trailed the market for the past three months and have collectively fallen 3.5% in value since early July. The Wedbush analyst Dan Ives said in a note to investors that this was a "gut check quarter" for Microsoft and Azure amid increasing competition in the AI ecosystem. "Our checks for Microsoft have been solid this quarter as we continue to believe Redmond is in the driver's seat and accelerating cloud deal flow for Azure with strong momentum into 2025 and beyond," Ives wrote, referring to the location of Microsoft's headquarters in Washington state. "We maintain our 'outperform' rating."

Microsoft reports $65.6 billion in quarterly sales as investors look to know if AI spending worth it

Microsoft on Wednesday reported a 11% increase in profit for the July-September quarter compared to the same time last year as investors looked for signs that the company's huge spending on artificial intelligence is paying off Microsoft on Wednesday reported an 11% increase in profit for the July-September quarter compared to the same time last year as investors looked for signs that the company's huge spending on artificial intelligence is paying off. The company reported quarterly net income of $24.7 billion, or $3.30 per share, which beat Wall Street expectations. The Redmond, Washington-based software maker posted revenue of $65.6 billion in the quarter, up 16% from last year. Analysts polled by FactSet Research were expecting Microsoft to earn $3.10 per share on revenue of $64.6 billion. Microsoft doesn't report revenue specifically from AI products but says it has infused the technology and its AI assistant, called Copilot, into all of its business segments, particularly its Azure cloud computing contracts. Leading in sales for the quarter was Microsoft's productivity business segment, which includes its Office suite of email and other workplace products, growing 12% to $28.3 billion. Microsoft's cloud-focused business segment grew 20% from the same time last year to $24.1 billion for the three months ending Sept. 30. Its personal computing business, led by its Windows division, grew 17% to $13.2 billion. Microsoft and the computer makers that run its Windows operating system this year unveiled a new class of AI-imbued laptops as the company confronts heightened competition from Big Tech rivals in pitching generative AI technology that can compose documents, make images and serve as a lifelike personal assistant at work or home. Building and operating AI systems is costly and Microsoft reported spending $20 billion over the quarter, mostly for its cloud computing and AI needs. Microsoft CEO Satya Nadella in a statement Wednesday emphasized the company's push to get customers applying AI platforms in their workplaces as AI transforms jobs and work tasks. Nadella, now in his tenth year as CEO, saw his annual compensation increase 63% this year to $79 million, according to a statement filed ahead of Microsoft's upcoming annual shareholder meeting in December. That's despite Nadella offering to have his cash incentive reduced to reflect his personal accountability for handling cybersecurity threats. Earlier this year, a scathing report by a federal review board found "a cascade of security failures" by Microsoft let Chinese state-backed hackers break into email accounts of senior U.S. officials.

Microsoft reports $65.6 billion in quarterly sales as investors look to know if AI spending worth it

REDMOND, Wash. (AP) -- Microsoft on Wednesday reported an 11% increase in profit for the July-September quarter compared to the same time last year as investors looked for signs that the company's huge spending on artificial intelligence is paying off. The company reported quarterly net income of $24.7 billion, or $3.30 per share, which beat Wall Street expectations. The Redmond, Washington-based software maker posted revenue of $65.6 billion in the quarter, up 16% from last year. Analysts polled by FactSet Research were expecting Microsoft to earn $3.10 per share on revenue of $64.6 billion. Microsoft doesn't report revenue specifically from AI products but says it has infused the technology and its AI assistant, called Copilot, into all of its business segments, particularly its Azure cloud computing contracts.

Microsoft beats fiscal first quarter expectations on AI transformation

Microsoft's (MSFT) fiscal first quarter results exceeded Wall Street's expectations thanks to the "AI-driven transformation." The tech giant reported revenues of $65.6 billion for the first quarter of fiscal year 2025 -- a 16% increase from the previous year. It reported net income was up 11% at $24.7 billion, and earnings per share, or EPS, was up 10% at $3.30. Microsoft Cloud revenue reported revenues of $38.9 billion, a 22% increase year over year, Amy Hood, chief financial officer of Microsoft, said, due to "[s]trong execution" by Microsoft's sales teams and partners. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," Satya Nadella, Microsoft chief executive, said in a statement. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage." The company's shares were up 0.13% at the market close on Wednesday and were up 1.7% during after-hours trading. The company's stock has climbed 16.6% so far this year. Microsoft was expected to report revenues of $64.57 billion for the fiscal first quarter, according to analyst estimates compiled by FactSet (FDS). Its Intelligent Cloud unit was expected to report $26.8 billion, according to the same estimates. The company was expected to report earnings per share, or EPS, of $3.11. Microsoft's revenue expectations were below the $64.7 billion it reported for the fourth quarter of fiscal year 2024. Despite beating Wall Street's expectations, its shares fell after its fourth-quarter results due to its Intelligent Cloud unit sales of $28.7 billion coming in below expectations. Investors were focused on the potential growth of Microsoft's Azure platform in the fiscal first quarter, as well as "reaffirmation of guidance for Azure to reaccelerate" in the second half of the fiscal year, analysts at Jefferies (JEF) said in a note on Tuesday. The analysts said they "expect AI contribution to Azure growth to increase" and that checks pointed to "continued strong demand for Azure AI services with more AI capacity added." "We will want to see signs supporting strong adoption of MSFT's Copilots and traction towards its $10B AI ARR goal, which we believe it could hit in the next couple quarters," Jefferies analysts said. "Additionally, we will want to see continued signs of AI's broader Halo effect across the business."

Microsoft Says It's Seeing More Demand for AI Than It Can Keep Up With

Microsoft's Intelligent Cloud segment, which includes the Azure cloud computing platform, led growth in the quarter. Revenue from the segment jumped 20% year-over-year to $24.09 billion as demand for AI surged, though analysts had expected more. CEO Satya Nadella said usage of Azure's Open AI service more than doubled over the past six months, with Microsoft's AI business on track to reach an annual revenue run rate of $10 billion in the second quarter, which would make it "the fastest business in our history to reach this milestone." "We are seeing AI drive a fundamental change in the business applications market as customers shift from legacy apps to AI first business processes," Nadella said. Hood said Microsoft expects Intelligent Cloud growth could slow to between 18% and 20% in the second quarter, with Azure's growth expected to decelerate to between 31% and 32%, before speeding up again in the back half of the fiscal year. Shares of Microsoft slid about 3% in extended trading following the earnings call. They were up 15% for 2024 through Wednesday's close.

Microsoft beats expectations, but AI concerns force shares down

San Francisco (AFP) - Microsoft delivered solid quarterly results on Wednesday, beating analyst expectations with revenue jumping 16 percent to $65.6 billion, but questions were raised about the company's big spending on the AI boom. The tech giant reported net income of $24.7 billion for the quarter ending September 30, marking an 11-percent increase from the same period last year. Earnings per share rose 10 percent to $3.30. The company attributed the solid performance to robust growth in its cloud computing and artificial intelligence businesses. "AI-driven transformation is changing work... and workflow across every role, function, and business process," said Microsoft CEO Satya Nadella, adding that the company was winning new customers through its AI platforms and tools. The Redmond-based company has been at the forefront of the generative AI revolution, largely thanks to its partnership with OpenAI, the creator of ChatGPT. The company has rolled out AI features at a furious pace, mainly under its Copilot brand, leaving investors hopeful for a return on investment from the expensive technology. But the tech giant warned that its gross margin outlook for its crucial cloud division, or how much money it expects to make, was going to be lower just as its investment in AI infrastructure was set to grow. The news sent Microsoft's share price down by nearly four percent in after-hours trading. "Microsoft's latest earnings came in a bit above expectations, but the results may leave some investors wanting more clarity," said Emarketer senior director Jeremy Goldman. "The true wildcard this quarter has been Microsoft's AI investments. It's pouring cash into building out infrastructure, with major capex implications. Yet, the revenue returns from AI remain more of a promise than a present reality," he added. Azure, Microsoft's cloud computing platform, saw strong growth with revenue increasing 34 percent, when adjusted for currency fluctuations. During the quarter, Microsoft also returned $9.0 billion to shareholders through dividends and share repurchases, helping pump up share value. With the jitters over Microsoft's massive outlays on AI, the company has trailed other tech giants on Wall Street this year, gaining just over 15 percent, while Meta has surged 70 percent and Amazon climbed nearly 30 percent. In a notable development, Microsoft's gaming division showed substantial growth, with Xbox content and services revenue surging 61 percent, primarily due to the recent Activision Blizzard acquisition, which contributed 53 percentage points to this increase. Google parent company Alphabet on Tuesday set the scene for the tech earnings season with a solid report, as its cloud computing division posted strong results on the back of AI adoption by search engine users.

Microsoft profits rise by double digits as investors question AI costs

Microsoft on Wednesday reported an 11% increase in profit for the July-September quarter compared to the same time last year as investors looked for signs that the company's huge spending on artificial intelligence is paying off. The company reported quarterly net income of $24.7 billion, or $3.30 per share, which beat Wall Street expectations. The Redmond-based software maker posted revenue of $65.6 billion in the quarter, up 16% from last year. Analysts polled by FactSet Research were expecting Microsoft to earn $3.10 per share on revenue of $64.6 billion. Microsoft doesn't report revenue specifically from AI products but says it has infused the technology and its AI assistant, called Copilot, into all of its business segments, particularly its Azure cloud computing contracts. Leading in sales for the quarter was Microsoft's productivity business segment, which includes its Office suite of email and other workplace products, growing 12% to $28.3 billion. Microsoft's cloud-focused business segment grew 20% from the same time last year to $24.1 billion for the three months ending Sept. 30. Its personal computing business, led by its Windows division, grew 17% to $13.2 billion. Microsoft and the computer makers that run its Windows operating system this year unveiled a new class of AI-imbued laptops as the company confronts heightened competition from Big Tech rivals in pitching generative AI technology that can compose documents, make images and serve as a lifelike personal assistant at work or home. Building and operating AI systems is costly and Microsoft reported spending $20 billion over the quarter, mostly for its cloud computing and AI needs. Microsoft CEO Satya Nadella in a statement Wednesday emphasized the company's push to get customers applying AI platforms in their workplaces as AI transforms jobs and work tasks. Nadella, now in his tenth year as CEO, saw his annual compensation increase 63% this year to $79 million, according to a statement filed ahead of Microsoft's upcoming annual shareholder meeting in December. That's despite Nadella offering to have his cash incentive reduced to reflect his personal accountability for handling cybersecurity threats. Earlier this year, a scathing report by a federal review board found "a cascade of security failures" by Microsoft let Chinese state-backed hackers break into email accounts of senior U.S. officials.

Microsoft Reports $65.6 Billion in Quarterly Sales as Investors Look to Know if AI Spending Worth It

REDMOND, Wash. (AP) -- Microsoft on Wednesday reported an 11% increase in profit for the July-September quarter compared to the same time last year as investors looked for signs that the company's huge spending on artificial intelligence is paying off. The company reported quarterly net income of $24.7 billion, or $3.30 per share, which beat Wall Street expectations. The Redmond, Washington-based software maker posted revenue of $65.6 billion in the quarter, up 16% from last year. Analysts polled by FactSet Research were expecting Microsoft to earn $3.10 per share on revenue of $64.6 billion. Microsoft doesn't report revenue specifically from AI products but says it has infused the technology and its AI assistant, called Copilot, into all of its business segments, particularly its Azure cloud computing contracts. Copyright 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Microsoft beats expectations with nearly $25B in quarterly profits, as AI revenue boosts cloud growth

Microsoft beat Wall Street's expectations across its key financial metrics for its first quarter of fiscal 2025, as artificial intelligence contributed 12 percentage points, a new high, to a 33% increase in the company's Azure cloud revenue. The company overall posted revenue of $65.6 billion, up 16%, vs. analyst expectations of $64.5 billion; profits of $24.7 billion, up 11%; and earnings per share of $3.30, compared to the Wall Street consensus of $3.08 per share. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage," Microsoft CEO Satya Nadella said in the company's earnings release.

Microsoft reports big profits amid massive AI investments

Microsoft reported quarterly earnings that impressed investors and showed how resilient the company is even as it spends heavily on AI. Some investors have been uneasy about the company's aggressive spending on AI, while others have demanded it. During this quarter, Microsoft reported that it spent $20 billion on capital expenditures, nearly double what it had spent during the same quarter last year. However, the company satisfied both groups of investors, as it revealed it has still been doing well in the short term amid those long-term investments. The fiscal quarter, which covered July through September, saw overall sales rise 16 percent year over year to $65.6 billion. Despite all that AI spending, profits were up 11 percent, too. The growth was largely driven by Azure and cloud services, which saw a 33 percent increase in revenue. The company attributed 12 percent of that to AI-related products and services. Meanwhile, Microsoft's gaming division continued to challenge long-standing assumptions that hardware is king, with Xbox content and services posting 61 percent increased year-over-year revenue despite a 29 percent drop in hardware sales. Microsoft has famously been inching away from the classic strategy of keeping software and services exclusive to its hardware, launching first-party games like Sea of Thieves not just on PC but on the competing PlayStation 5 console from Sony. Compared to the Xbox, the PlayStation is dominant in sales and install base for this generation. But don't make the mistake of assuming that a 61 percent jump in content and services revenue is solely because Microsoft's Game Pass subscription service is taking off. The company attributed 53 points of that to the recent $69 billion Activision acquisition.

Microsoft reports earnings with a big boost from AI

Why it matters: The newly provided figure shows how Microsoft is seeing additional revenue, largely from its Azure cloud business, but also across other areas including its Microsoft 365 productivity business. What they're saying: "Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone," Nadella said, kicking off a conference call following the company's quarterly earnings report. By the numbers: Microsoft reported per-share earnings of $3.30, on revenue of $65.6 billion, both ahead of analyst expectations. The big picture: Microsoft is not alone in seeing an AI boost. Google reported Tuesday that its cloud business grew 34% year-over-year, in part from AI-related demand.

Microsoft's AI Business Set To Hit $10B Revenue Milestone In Q2: Satya Nadella Says It Is The 'Fastest Business In Our History' - Microsoft (NASDAQ:MSFT)

Microsoft Corp MSFT announced during its first-quarter earnings call that its artificial intelligence business is on track to surpass $10 billion in annual revenue run rate next quarter, marking the fastest-growing business segment in the company's history. What Happened: CEO Satya Nadella highlighted the rapid adoption of AI across the company's product portfolio, emphasizing strong customer demand and widespread enterprise implementation. "AI-driven transformation is changing work, work artifacts and workflow across every role, function, and business process, helping customers drive new growth and operating leverage," Nadella said during the earnings call. "Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone," Nadella said. Key developments driving AI growth include: Nearly 70% of Fortune 500 companies now use Microsoft 365 Copilot Azure OpenAI Service usage more than doubled over the past six months GitHub Copilot enterprise customers increased 55% quarter-over-quarter CFO Amy Hood emphasized the strategic importance of AI investments, noting that "only 2.5 years in, our AI business is on track to surpass $10 billion of annual revenue run rate in Q2. This will be the fastest business in our history to reach this milestone." See Also: Cathie Wood Shuffles Her Tech Deck: Continues Dumping Tesla And Palantir, Stocks Up On AMD And Meta Why It Matters: The company's Azure cloud service saw 33% growth, with AI services contributing approximately 12 points to that growth. However, Microsoft acknowledged that demand continues to exceed available capacity, prompting increased infrastructure investments. The rapid growth in AI revenue comes as Microsoft reported overall revenue of $65.6 billion for the first quarter, up 16% year-over-year, with Microsoft Cloud revenue reaching $38.9 billion, representing 22% growth. Price Action: Microsoft Corp's stock closed at $432.53 on Wednesday, up 0.13% for the day. In after-hours trading, the stock declined by 3.71%. Year-to-date, Microsoft shares have seen a notable gain of 16.63%, according to data from Benzinga Pro. Read Next: Mark Zuckerberg Says Meta's Open-Source Gambit Is Paying Off As Nvidia And AMD Optimize For Llama: 'A Big Deal On Several Fronts' Image Via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs

Microsoft: We're no rent-a-GPU shop. We make money with AI

Microsoft has explained that its method of funding the tens of billions it's spending on new datacenters and AI infrastructure is to shun customers who want to rent GPUs to train new AI models. CEO Satya Nadella revealed that strategy on Wednesday during the software behemoth's Q1 2025 earnings call, during which execs detailed how the biz landed quarterly revenue of $65.6 billion and net income of $24.7 billion, improvements of 16 and 11 percent respectively. Microsoft's Intelligent Cloud segment, which covers server products and cloud services and is Redmond's biggest single source of cash, saw revenue grow 20 percent year on year to reach $24.1 billion. Azure and other cloud services grew by 33 percent. Azure Arc - the multi-and-hybrid-cloud management tool - was called out for having won 39,000 customers. AI was of course to the fore on the earnings call, with Nadella pointing out Microsoft's AI biz is on track to track $10 billion annual run rate next quarter. That would make it the fastest new product to do so in Microsoft history. Investment analysts invited to ask questions during the call were curious to know how Microsoft is paying for the massive infrastructure build - $20 billion this quarter alone, most of it on datacenters and servers - required to deliver AI services. Nadella and CFO Amy Hood told a story of supply chain delays making it sometimes hard to bring new infrastructure online to satisfy demand, and impacting margins. But when new AI capacity comes online, increased revenue follows. Another way Microsoft is managing things is by turning away training workloads. "We're not actually selling raw GPUs for other people to train," Nadella said. "In fact, that's sort of a business we turn away because we have so much demand on inference" to power the various Copilots and other AI services. "We kind of really are not even participating in most of that because we are literally going to the real demand, which is in the enterprise space or our own products like GitHub Copilot or M365 Copilot. So, I feel the quality of our revenue is also pretty superior in that context," Nadella added. CFO Amy Hood added that Microsoft sees revenue won from inferencing as generating the funds to pay for future model training efforts. But while focusing on inferencing may be a cunning plan, it's not helping to control costs - despite Microsoft's best efforts they rose 12 percent in the quarter. Even though some of that increase was due to Activision staff coming aboard, overall headcount rose two percent. Most of Microsoft's business lines all posted solid growth: ten percent for LinkedIn; 14 percent for Dynamics; Xbox by 61 percent (thanks to the Activision acquisition); and search and advertising by 17 percent. Microsoft 365 commercial revenue grew 13 percent and consumer popped up five points. But Windows OEM and device revenue dipped by two percent - and was forecast to do so again. If that worries Microsoft's leaders, they didn't show it. And they had plenty of other wins to celebrate, reeling off names of blue chip companies that have put Microsoft's AI offerings to work. CFO Hood also pointed to "growth in the number of $10 million-plus contracts for both Azure and Microsoft 365" and "an increase in the number of $100 million-plus contracts for Azure." All those wins have left Microsoft with $259 billion of future revenue to which customers have already committed. And the tech leviathan predicted strong growth in most of its major product lines, with Azure expected to grow at 31 or 32 percent, and Productivity and Business Processes wares to grow by ten to eleven percent. It did, however, warn of some small future dull spots. One is a likely dip in revenue from on-prem server product revenue. But that's not a sign of decline - rather a reflection of the fact that this time last year Redmond was in the last weeks of selling long-term support for Windows Server 2012. Similarly, a forecast slight fall in Microsoft 365 revenue was explained away as cyclical. Microsoft's shares spiked from around $435 to $442 in after-hours trading, before settling at around $417 - seemingly a sign that investors hoped for better news on costs, but were comforted that AI is paying off. ®

Microsoft's AI demand under scrutiny as investors seek payday

(Reuters) - Microsoft is expected to report its slowest quarterly revenue growth in a year on Wednesday, while investors await signs of AI demand amid growing worries about the slow payoff from hefty investments in the technology. The software giant is widely seen as the front-runner in the race to capitalize on generative AI, in part thanks to its investment in ChatGPT-owner OpenAI. But recent reports point to slow adoption for its key products including the $30-per-month Copilot assistant for enterprises. There's "a wall of worry" around Microsoft's earnings, Morgan Stanley analysts said, pointing to "ramping capital expenditures, margin compression, lack of evidence on AI returns, and messiness post a financial resegmentation." The results are the first since the company in August rejigged the way it reports its businesses to align them more closely with how they are managed. That move has, however, made it harder to estimate last quarter's performance. The company's stock has risen just about 1% since it last reported results in late July, widely underperforming the benchmark S&P 500. But the stock is around 14% higher for the year. Microsoft's Azure cloud-computing unit likely grew 33% in the company's fiscal first quarter ended Sept. 30, according to seven analysts polled by Visible Alpha. That is in-line with the company's expectations, but a tad lower than the fourth quarter. While AI's contribution to Azure has risen - and accounted for 11 percentage points of growth in the fourth quarter - the overall business has slowed. Microsoft said in July it expected Azure growth to pick up in the second half of the fiscal year. Microsoft's total revenue is expected to have risen 14.1% to $64.51 billion in the September quarter, according to analysts polled by LSEG. Microsoft has warned - like its AI rivals - that spending on the technology will remain high. Capital spending in the September quarter is estimated to have jumped 71.7% to $19.23 billion, according to Visible Alpha. COPILOT SKEPTICISM Copilot has not taken off the way Microsoft had predicted. A survey of 152 information technology companies showed the vast majority of them had not progressed their Copilot initiatives past the pilot stage, research firm Gartner said in August. Some analysts believe, though, that Microsoft's recent moves including the ability to create autonomous AI agents - which are capable of doing routine tasks without human intervention - with the help of Copilot could boost adoption of the assistant. "Most investors seem skeptical of 365 Copilot adoption since they aren't using it personally very much," Melius Research analyst Ben Reitzes said. "However, it seems Copilot data points are getting modestly better," he said, adding that the assistant "boasts an increasingly improving customer list." Microsoft's productivity and business processes unit - home to Office products, LinkedIn and 365 Copilot - is expected to report stable quarter-on-quarter growth of 12%, according to Bernstein's Mark Moerdler, among the top-rated analysts for the company, according to LSEG. Revenue at intelligent cloud, which houses Azure, likely increased by 20%, the same pace as the previous quarter, Moerdler estimated. He added that growth in the more personal computing unit, which includes Windows and gaming, likely ticked up as the PC market stabilized. (Reporting by Aditya Soni in Bengaluru; Editing by Sayantani Ghosh and Shinjini Ganguli)

Microsoft's AI demand under scrutiny as investors seek payday

Oct 28 (Reuters) - Microsoft (MSFT.O), opens new tab is expected to report its slowest quarterly revenue growth in a year on Wednesday, while investors await signs of AI demand amid growing worries about the slow payoff from hefty investments in the technology. The software giant is widely seen as the front-runner in the race to capitalize on generative AI, in part thanks to its investment in ChatGPT-owner OpenAI. But recent reports point to slow adoption for its key products including the $30-per-month Copilot assistant for enterprises. Advertisement · Scroll to continue There's "a wall of worry" around Microsoft's earnings, Morgan Stanley analysts said, pointing to "ramping capital expenditures, margin compression, lack of evidence on AI returns, and messiness post a financial resegmentation." The results are the first since the company in August rejigged the way it reports its businesses to align them more closely with how they are managed. That move has, however, made it harder to estimate last quarter's performance. Advertisement · Scroll to continue The company's stock has risen just about 1% since it last reported results in late July, widely underperforming the benchmark S&P 500 (.SPX), opens new tab. But the stock is around 14% higher for the year. Microsoft's Azure cloud-computing unit likely grew 33% in the company's fiscal first quarter ended Sept. 30, according to seven analysts polled by Visible Alpha. That is in-line with the company's expectations, but a tad lower than the fourth quarter. While AI's contribution to Azure has risen - and accounted for 11 percentage points of growth in the fourth quarter - the overall business has slowed. Microsoft said in July it expected Azure growth to pick up in the second half of the fiscal year. Microsoft's total revenue is expected to have risen 14.1% to $64.51 billion in the September quarter, according to analysts polled by LSEG. Microsoft has warned - like its AI rivals - that spending on the technology will remain high. Capital spending in the September quarter is estimated to have jumped 71.7% to $19.23 billion, according to Visible Alpha. COPILOT SKEPTICISM Copilot has not taken off the way Microsoft had predicted. A survey of 152 information technology companies showed the vast majority of them had not progressed their Copilot initiatives past the pilot stage, research firm Gartner said in August. Some analysts believe, though, that Microsoft's recent moves including the ability to create autonomous AI agents - which are capable of doing routine tasks without human intervention - with the help of Copilot could boost adoption of the assistant. "Most investors seem skeptical of 365 Copilot adoption since they aren't using it personally very much," Melius Research analyst Ben Reitzes said. "However, it seems Copilot data points are getting modestly better," he said, adding that the assistant "boasts an increasingly improving customer list." Microsoft's productivity and business processes unit - home to Office products, LinkedIn and 365 Copilot - is expected to report stable quarter-on-quarter growth of 12%, according to Bernstein's Mark Moerdler, among the top-rated analysts for the company, according to LSEG. Revenue at intelligent cloud, which houses Azure, likely increased by 20%, the same pace as the previous quarter, Moerdler estimated. He added that growth in the more personal computing unit, which includes Windows and gaming, likely ticked up as the PC market stabilized. Reporting by Aditya Soni in Bengaluru; Editing by Sayantani Ghosh and Shinjini Ganguli Our Standards: The Thomson Reuters Trust Principles., opens new tab

Microsoft Is on Track to Hit a Major Milestone, the 'Fastest Business in Our History,' According to Its CEO

AI is an expensive business, costing upwards of $100 million simply to train a new model. At Microsoft, though, a multi-billion dollar investment in AI appears to be paying off: CEO Satya Nadella said on a quarterly earnings call on Wednesday that Microsoft's AI business "is on track to surpass an annual revenue run rate of $10 billion next quarter" and become "the fastest business in our history to reach this milestone." The annual revenue run rate projects revenue over a period of time based on previous revenue. Related: Will It Take Nuclear Power to Sustain AI? Microsoft Is Betting on It. Microsoft has invested about $14 billion into OpenAI, the company behind ChatGPT. It has also made several multi-billion dollar AI commitments, including a deal to reopen Three Mile Island, a nuclear power plant near Harrisburg, Pennsylvania. Nadella also pointed out on the call, which went over earnings for the first quarter of fiscal year 2025, that Microsoft Cloud revenue was up 22% year over year, growing to $38.9 billion for the quarter ending September 30. Revenue overall increased 16% to $65.6 billion. At Microsoft, "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," Nadella said. Though Microsoft's earnings were better than expected, the company's shares fell by more than 5% on Thursday because its predicted cloud revenue growth was less than expected. Related: These CEOs Have the Biggest Pay Packages in the U.S., According to a New Report Nadella was well-compensated for leading Microsoft: He received a pay increase of over $30 million for the fiscal year ending June 30, resulting in an overall pay of $79.1 million compared to $48.5 million a year prior.

Microsoft's AI bet pays off as Azure revenue grows, but its stock falls on infrastructure supplier delays - SiliconANGLE

Microsoft's AI bet pays off as Azure revenue grows, but its stock falls on infrastructure supplier delays Microsoft Corp. delivered a solid fiscal first quarter earnings and revenue beat today, but its stock was moving lower after its guidance revealed slower-than-expected growth over the next three-month period. The company reported earnings before certain costs such as stock compensation of $3.30 per share, comfortably ahead of Wall Street's target of $3.10 per share, while revenue jumped 16% from a year earlier to $65.59 billion, ahead of the $64.51 billion consensus estimate. All told, Microsoft reported net income of $24.67 billion for the quarter, up 11% from a year earlier. The numbers were impressive, but the company's forecast for the current quarter was less so. Looking ahead, officials called for revenue of between $68.1 billion and $69.1 billion, below the Street's forecast of $69.83 billion. Officials blamed the lower forecast on data center infrastructure suppliers, saying late deliveries of equipment mean the company won't be able to meet its expected demand in the second quarter. However, the company indicated that the delays are only going to be a short-term issue. "I feel pretty good that going into the second half of this fiscal year, some of the supply-demand will match up," said Microsoft Chief Executive Satya Nadella on a call with analysts. Today's report is the first to come after Microsoft announced it would be making some changes to the way it reports its financials. In August, the company said the accounting changes are meant to better align Azure with consumption revenue, similar to how cloud infrastructure industry leader Amazon Web Services Inc. reports its consumption metrics. As part of the changes, Microsoft said it will remove certain mature, slower growth revenue streams, increasing the revenue growth rates for Azure. The changes also have the effect of increasing the artificial intelligence services contribution to Azure's bottom line. The company reported that sales from productivity and business processes in the quarter increased 12% from a year earlier to $28.32 billion, ahead of the $27.9 billion consensus estimate. With the accounting changes, Microsoft's Azure and other cloud services revenue growth metric excluded sales from its mobility, security and Power BI data analytics tools, providing a clearer picture of Azure consumption. The company said Azure's revenue grew by 33% in real terms, and 34% at constant currency, with 12% of that coming from AI services. The Street had forecast Azure revenue growth of just 29.4%. That's slightly slower than the 35% annual growth of Google Cloud, as reported by Alphabet Inc. yesterday. AWS, which leads the cloud infrastructure market, will report its latest results tomorrow. Microsoft's chief financial officer Amy Hood told analysts on the call that "demand continues to be higher than our available capacity." Elsewhere, the full intelligent cloud segment, which includes sales from Azure, Windows Server and enterprise services, delivered $24.09 billion in revenue, up 20% from a year ago and above the Street's consensus of $24.04 billion. Microsoft's more personal computing segment is now smaller as a result of the accounting changes, but it still managed to grow 17% to $13.18 billion, coming in ahead of the Street's forecast of $12.56 billion. Within that segment, sales of devices and Windows operating system licenses to device makers rose 2% from a year earlier, despite quarterly PC shipments declining by 1.3% during the quarter, according to the latest data from Gartner Inc. During the quarter, Microsoft continued to invest billions of dollars into its AI efforts, ramping up spending to build out its infrastructure so it can handle increasingly more powerful workloads on behalf of its customers. It also invested billions more into OpenAI, the creator of ChatGPT, which recently closed on a $6.6 billion round of funding, taking its value to more than $157 billion. Despite its ongoing investments in AI, it's actually tough to gauge how much revenue Microsoft is generating as a result of those endeavors. The bulk of its AI revenue comes via its cloud infrastructure services, but it's not broken out separately. In addition. the company has infused products such as Microsoft 365 and Bing with generative AI capabilities. However, it's thought that the revenue from its AI software products is relatively small. The company hasn't broken out sales from Copilot, its AI assistant technology that costs $30 per person. It's said that investors are hopeful Microsoft will start shedding more light on the kind of demand it's seeing for the Copilot tools, but there are suspicions that it's not doing as well as the company had hoped. "There's been a little disappointment around Office Copilot relative to the promise and price," Rishi Jaluria, an analyst with RBC Capital, told the Wall Street Journal "The product isn't necessarily there." Microsoft is also yet to reveal its hand in what many analysts feel will be the next big thing in the AI industry, so-called "agentic AI", or AI agents that go beyond chatbots like ChatGPT and actually take actions on behalf of their users. Valoir Research analyst Rebecca Wettemann told SiliconANGLE that Microsoft has lost ground in this area, with the likes of Salesforce Inc.. Oracle Corp. and ServiceNow Inc. all beating it to market with their autonomous AI technology. So whatever Microsoft comes up with is "going to have to be extremely compelling, both in terms of time to deploy and accuracy," she said. The analyst said Microsoft will most probably look to gain traction in agentic AI by forging partnerships and alliances with enterprise vendors in areas like human capital and talent management, similar to how Workday Inc. has partnered with Salesforce. It will also need to come up with a new pricing model, as agentic AI doesn't fit with the per-user pricing that it uses with services like Copilot, she said. "Microsoft will face increasing price pressure for Copilot," Wettemann continued. "As more and more enterprise software vendors follow Oracle's approach of bundling in AI capabilities as part of the overall software license and delivering AI grounded in data within enterprise applications, customers are going to push back more on standalone AI pricing and standalone copilots." Microsoft's stock was down more than 3% in the after-hours trading session. Prior to Wednesday's close, the stock had gained about 15% in the year to date, while the Nasdaq is up 24% in the same period.

Microsoft Outperforms With Surging Cloud | The Motley Fool

Microsoft reported strong earnings fueled by growth in cloud and AI. Microsoft (MSFT 0.13%), the global technology leader known for its software and cloud services, reported its latest quarterly earnings on October 30, 2024, for the quarter ending September 30, 2024. The company showcased a strong financial performance, with revenue hitting $65.6 billion, a 16% increase compared to the same period last year, surpassing analysts' estimates. Diluted earnings per share came in at $3.30, exceeding the expected $3.10, driven by robust growth in its cloud services. Microsoft's performance highlights a favorable quarter with significant strides in cloud services and AI. Source: Analyst estimates for the quarter provided by FactSet. The American technology behemoth, Microsoft, is renowned for its diverse array of business segments that include personal computing, productivity tools, intelligent cloud, and AI innovation. Microsoft's focus on growing its cloud services, particularly Azure, has been central, proving instrumental in its impressive financial performance this quarter. AI integration has also become a critical component, cementing its reputation as a leader in technologically advanced solutions. In recent years, Microsoft has centered its business strategy around cloud services, AI integration, and productivity, which includes Office 365 and Dynamics 365. Key success factors lie in offering scalable cloud solutions and integrating AI across product lines with top-notch security, aiming to maintain or gain competitive advantage in these areas. During the last quarter, Microsoft reported revenue of $65.6 billion, driven largely by its intelligent cloud division. Azure, a significant contributor within this segment, saw revenues grow by 33%, while Microsoft Cloud revenue grew 22% year-over-year to $38.9 billion. This marks a notable expansion, reflecting the company's strategic success in capturing the growing demand for cloud and AI-enabled services. The More Personal Computing segment saw a 17% increase in revenue to $13.2 billion. This growth was boosted by a remarkable 61% rise in Xbox content and services, partially attributed to the completion of its Activision acquisition. However, the Windows OEM and Devices segment showed a slower growth of just 2%, indicating possible market saturation. Meanwhile, Microsoft's net income rose 11% to $24.7 billion, exhibiting strong financial health. This improvement is underpinned by its strategic focus on high-margin services and cloud expansion. During this quarter, the company returned $9.0 billion to shareholders through dividends and share repurchases. This commitment indicates Microsoft's balance of rewarding investors while investing in future growth opportunities. Microsoft projects continuous growth, focusing on expanding its cloud infrastructure and scaling AI capabilities to meet rising demand. The company anticipates maintaining its momentum, especially as it navigates challenges linked to competitive pressures in the cloud and AI landscapes. Management provided guidance indicating an emphasis on AI and cloud service integration. There is a continued push towards innovation, particularly in AI, with investments aimed at expanding Azure's capacities. Investors should look forward to Microsoft's advancements in AI and cloud with optimism as these areas present significant growth potential. However, keeping an eye on competitive dynamics will be crucial to understanding Microsoft's trajectory in upcoming quarters.

Microsoft faces scrutiny over AI spending as Copilot adoption lags

In brief: Microsoft will reveal its quarterly financial results on Wednesday, and it might not be a high point for the Redmond giant. Analysts expect Microsoft to report its slowest quarterly revenue growth in a year, and once again there are concerns about how much money the company is investing in AI when the demand and returns aren't justifying its outlay. Microsoft has invested around $13 billion in ChatGPT-maker OpenAI since 2019, but we've been hearing reports since April that investors are concerned that reaping the financial rewards is taking longer than expected. Reuters reports that Morgan Stanley analysts say there is a "wall of worry" around Microsoft's earnings due to "ramping capital expenditures, margin compression, lack of evidence on AI returns, and messiness post a financial resegmentation." One of the biggest AI-related disappointments for Microsoft is Copilot. The company has been pushing its AI tools incredibly hard, going as far as adding a dedicated button to its latest laptops, but most people are apathetic toward Copilot, with the most common complaint reportedly that it's not as good as ChatGPT. In September, Salesforce CEO Marc Benioff said Copilot is basically the new Microsoft Clippy, and that customers had not gotten value from it. A survey of 152 information technology companies carried out by research firm Gartner in August found that the majority of them had not progressed their Copilot initiatives past the pilot stage. Microsoft could boost Copilot uptake through an enterprise tool it unveiled last week. Microsoft Copilot Studio lets clients build AI agents that can automate internal tasks, fulfilling the sorts of administrative roles usually performed by employees. That's obviously brought a lot of criticism about AI replacing human workers, though Microsoft claims it will automate tedious tasks, freeing employees to focus on other, more important things, like looking for a job before they're replaced, probably. Microsoft's stock price is up 14% this year, but it has only risen around 1% since late July, underperforming the benchmark S&P 500. While the Azure cloud-computing unit likely grew by 33% in the fiscal first quarter, matching company expectations, it is lower than in the fourth quarter. Microsoft's total revenue is expected to have risen 14.1% to $64.51 billion. It says that spending on AI technology will remain high. It was reported last week that Microsoft CEO Satya Nadella has seen his take-home pay increase by 63% compared to last year despite the CEO requesting the amount he receives be reduced. While Nadella's salary was cut by 50%, other forms of his compensation increased significantly.

Microsoft's AI demand under scrutiny as investors seek payday

The software giant is widely seen as the front-runner in the race to capitalize on generative AI, in part thanks to its investment in ChatGPT-owner OpenAI. But recent reports point to slow adoption for its key products including the $30-per-month Copilot assistant for enterprises.Microsoft is expected to report its slowest quarterly revenue growth in a year on Wednesday, while investors await signs of AI demand amid growing worries about the slow payoff from hefty investments in the technology. The software giant is widely seen as the front-runner in the race to capitalize on generative AI, in part thanks to its investment in ChatGPT-owner OpenAI. But recent reports point to slow adoption for its key products including the $30-per-month Copilot assistant for enterprises. There's "a wall of worry" around Microsoft's earnings, Morgan Stanley analysts said, pointing to "ramping capital expenditures, margin compression, lack of evidence on AI returns, and messiness post a financial resegmentation." The results are the first since the company in August rejigged the way it reports its businesses to align them more closely with how they are managed. That move has, however, made it harder to estimate last quarter's performance. The company's stock has risen just about 1% since it last reported results in late July, widely underperforming the benchmark S&P 500. But the stock is around 14% higher for the year. Microsoft's Azure cloud-computing unit likely grew 33% in the company's fiscal first quarter ended Sept. 30, according to seven analysts polled by Visible Alpha. That is in-line with the company's expectations, but a tad lower than the fourth quarter. While AI's contribution to Azure has risen - and accounted for 11 percentage points of growth in the fourth quarter - the overall business has slowed. Microsoft said in July it expected Azure growth to pick up in the second half of the fiscal year. Microsoft's total revenue is expected to have risen 14.1% to $64.51 billion in the September quarter, according to analysts polled by LSEG. Microsoft has warned - like its AI rivals - that spending on the technology will remain high. Capital spending in the September quarter is estimated to have jumped 71.7% to $19.23 billion, according to Visible Alpha. Copilot skepticism Copilot has not taken off the way Microsoft had predicted. A survey of 152 information technology companies showed the vast majority of them had not progressed their Copilot initiatives past the pilot stage, research firm Gartner said in August. Some analysts believe, though, that Microsoft's recent moves including the ability to create autonomous AI agents - which are capable of doing routine tasks without human intervention - with the help of Copilot could boost adoption of the assistant. "Most investors seem skeptical of 365 Copilot adoption since they aren't using it personally very much," Melius Research analyst Ben Reitzes said. "However, it seems Copilot data points are getting modestly better," he said, adding that the assistant "boasts an increasingly improving customer list." Microsoft's productivity and business processes unit - home to Office products, LinkedIn and 365 Copilot - is expected to report stable quarter-on-quarter growth of 12%, according to Bernstein's Mark Moerdler, among the top-rated analysts for the company, according to LSEG. Revenue at intelligent cloud, which houses Azure, likely increased by 20%, the same pace as the previous quarter, Moerdler estimated. He added that growth in the more personal computing unit, which includes Windows and gaming, likely ticked up as the PC market stabilized.

Microsoft CEO: AI Provides 'On-Ramp' To Azure Data Services, Copilot Continues To Surge

The Microsoft AI business overall is on track to become the 'fastest business in our history' to reach a $10 billion annual revenue run rate, CEO Satya Nadella said during the tech giant's quarterly call Wednesday. Microsoft is continuing to generate rapid growth with its portfolio of AI offerings with Copilot seeing strong adoption and Azure AI providing a gateway to a broader set of cloud services including in data and analytics, Microsoft CEO Satya Nadella said Wednesday. On the whole, "our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone," Nadella said during Microsoft's quarterly earnings call with analysts. [Related: Microsoft Q1 2025 Preview: 5 Things To Know] The Microsoft CEO made the comments as the tech giant reported financial results for the first quarter of its fiscal 2025, ended Sept. 30, which saw the company's revenue climb 16 percent from the same period a year ago to reach $65.59 billion. The results easily surpassed the analyst consensus estimate of $64.51 billion in Microsoft revenue for the quarter. Microsoft's stock price slid 3.7 percent to $416.39 a share in after-hours trading Wednesday, however, after the company's fiscal Q2 guidance fell short of Wall Street expectations. During the call with analysts, Nadella touted a number of signs of robust AI-related growth, including around Microsoft 365 Copilot and a portfolio of related GenAI applications and tools. Nearly 70 percent of companies in the Fortune 500 are now using Microsoft 365 Copilot, as customers "continue to adopt it at a faster rate than any other new Microsoft 365 suite," Nadella said. In addition to providing its flagship Copilot application, Microsoft also offers the Copilot Studio platform for building custom GenAI copilots, "agents" for automation of business processes and, most recently, "autonomous agents" that can come even closer to offering full autonomy AI. With this array of GenAI-powered applications and tools, "we have built an end-to-end system for AI business transformation," Nadella said. Additionally, the AI opportunity is driving greater adoption of other services on Microsoft's Azure cloud platform, he said Wednesday. For instance, "Azure AI is also increasingly an on-ramp to our data and analytics services," Nadella said. For example, "as developers build new AI apps on Azure, we have seen an acceleration of Azure Cosmos DB and Azure SQL DB Hyperscale usage," he said. Likewise, GitHub Copilot also continues to see widening adoption by developers, with a 55-percent increase in Copilot Enterprise during Microsoft's fiscal Q1 just from the prior quarter, according to Nadella. For Microsoft's Intelligent Cloud business overall, revenue during the quarter rose 21 percent year-over-year to $24.09 billion. The Productivity and Business Processes business grew 13 percent from the year before to reach $28.32 billion in revenue for the quarter, while the More Personal Computing segment climbed 17 percent to $13.18 billion. Cybersecurity was another bright spot for the quarter, with Microsoft's Security Copilot offering now "being used by companies in every industry" and Microsoft continuing "to take share across all major categories we serve" in security, Nadella said. In addition to leveraging GenAI capabilities in its security tools, Microsoft is also bringing a focus on providing protection for customer AI deployments, as well, he said. "Customers have used Defender to discover and secure more than 750,000 GenAI app instances and used Purview to audit over 1 billion Copilot interactions to meet their compliance obligations," Nadella said during the call Wednesday.

Microsoft's AI Bet Shows Strong Early Returns as Enterprise Adoption Accelerates | PYMNTS.com

Microsoft's aggressive push into artificial intelligence (AI) is showing traction with enterprise customers, as the company reported growth in AI adoption across its product portfolio. "All-up, we now have over 60,000 Azure AI customers, up nearly 60% year over year, and average spend per customer continues to grow," CEO Satya Nadella told investors during Tuesday's earnings call. The company's AI strategy spans from infrastructure to applications, with Azure serving as the foundation. "With Azure AI, we are building out the app server for the AI wave, providing access to the most diverse selection of models to meet customers' unique cost, latency and design considerations," Nadella said. Enterprise adoption of Microsoft's AI tools appears particularly strong in the developer space. "GitHub Copilot is by far the most widely adopted AI-powered developer tool," Nadella said. "Just over two years since its general availability, more than 77,000 organizations -- from BBVA, FedEx, and H&M, to Infosys and Paytm -- have adopted Copilot, up 180% year over year." The company's Microsoft 365 Copilot, an AI assistant for office workers, is also gaining momentum. "Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow and work artifacts," Nadella said. "The number of people who use Copilot daily at work nearly doubled quarter over quarter." Large enterprises are making significant commitments to the technology. "All-up, the number of customers with more than 10,000 seats more than doubled quarter over quarter, including Capital Group, Disney, Dow, Kyndryl, Novartis. And EY alone will deploy Copilot to 150,000 of its employees," Nadella noted. However, Microsoft acknowledged growing pains as it scales its AI infrastructure. CFO Amy Hood addressed the challenge on the call: "We are constrained on AI capacity. And because of that, actually, we ... have signed up with third parties to help us as we are behind with some leases on AI capacity." To meet growing demand, Microsoft is making substantial infrastructure investments. "Cloud- and AI-related spend represents nearly all of total capital expenditures," Hood explained. "Within that, roughly half is for infrastructure needs, where we continue to build and lease data centers that will support monetization over the next 15 years and beyond. The remaining cloud- and AI-related spend is primarily for servers, both CPUs and GPUs, to serve customers based on demand signals." The company's approach to AI infrastructure differs from its earlier cloud buildout. "When we did this last transition, the first transition to the cloud, which seems a long time ago sometimes, it rolled out quite differently. We rolled out more geo by geo. And this one, because we have demand on a global basis, we are doing it on a global basis," Hood said. Microsoft's AI strategy extends beyond office productivity to industry-specific solutions. In healthcare, "More than 400 healthcare organizations -- including Community Health Network, Intermountain, Northwestern Memorial Healthcare, and Ohio State University Wexner Medical Center -- have purchased DAX Copilot to date, up over 40% quarter over quarter," Nadella reported. The company is also seeing strong adoption of its AI development tools by business users. "To date, over 480,000 organizations have used AI-powered capabilities in Power Platform, up 45% quarter over quarter," Nadella said. Looking ahead, Microsoft plans to continue scaling its AI infrastructure to meet demand. Hood noted that while there are current capacity constraints, particularly in the first half of the fiscal year, "in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand." Nadella emphasized that the company's AI strategy is grounded in customer demand and value creation: "We primarily start right now from the demand side. What I mean by that is, what's the product shape of the product portfolio?"

Microsoft earnings preview: Focus on Azure growth and AI spending

Microsoft is set to release its quarterly earnings this week, shedding light on the trajectory of the artificial intelligence industry. Euronews Business highlights the key metrics that investors should focus on. Microsoft will report its first-quarter earnings for the fiscal year 2025 after the US markets close on 30 October. The artificial intelligence (AI) pioneer launched ChatGPT in early 2023, sparking a global race in Large Language Model (LLM)-powered generative AI. Since then, its tech rivals -- Alphabet and Amazon -- have intensified competition in AI-supported cloud services. Microsoft stands as the third-largest company in the world, with a market valuation of $3.18 trillion (€2.94 trillion), behind Apple and Nvidia. Its shares are up 15% year-to-date, underperforming most tech giants due to disappointing earnings in the June quarter as its cloud growth slowed. In the upcoming earnings report, investors will closely monitor Microsoft's growth in Azure cloud services, which is the core segment helping the tech giant compete with its rivals. The second key focus will be its spending on data centre construction, as rising costs could squeeze profit margins. Microsoft's Azure and other cloud services segment accounts for nearly 60% of the company's total revenue, making it critical to Microsoft's growth. Azure ranks second globally in market share, behind Amazon Web Services (AWS) and followed by Google Cloud. Investors view this segment as central to Microsoft's competitiveness. In the fourth quarter of the fiscal year 2024, its Intelligent Cloud segment reported revenue of $28.51 billion (€26.37 billion), an increase of 19% year-on-year, driven by a 29% growth in Azure and other cloud services. However, Azure's growth fell short of analysts' expectations in that quarter, as the pace slowed from the low-to-mid 30% range seen in previous quarters. According to FactSet, revenue for the Intelligent Cloud segment is expected to reach $26.8 billion (€24.78 billion) in the September quarter, up 10% from a year earlier, indicating a further slowdown. Some analysts expect Azure and other cloud services to grow by low-to-mid 30%, marking a slight sequential increase from the July quarter. However, the company may need to deliver a significant earnings surprise in this segment to justify its rising investment in AI infrastructure. Additionally, analysts anticipate Microsoft will report earnings per share of $3.1 (€2.9) on overall revenue of $64.57 billion (€59.71 billion), reflecting annual growth of 3.7% and 14% respectively. The projected figures also suggest a slight slowdown in overall revenue growth, down from 15% in the July quarter. Microsoft has previously noted that it is facing capacity challenges. CFO Amy Hood mentioned that the company has increased investment in data centre infrastructure to meet the fast-growing demand for AI training. In the forward-looking statements of the June quarter, the tech giant acknowledged "significant investments in products and services that may not achieve expected returns," as capital expenditure surged to $19 billion (€17.5 billion) from $16 billion in the March quarter. CEO Satya Nadella remarked, "As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era." A highlight of Microsoft's upcoming earnings report could be updates on its Copilot autonomous agent, an AI-powered assistant that users can build in Copilot Studios. It "understands the nature of your work and acts on your behalf," according to Microsoft, as revealed during an AI Tour in London earlier this month. The AI agents can either simply respond to questions or be fully autonomous in managing business processes. The company has announced that a public preview of this new feature will be available in November. It will also introduce 10 new autonomous agents for business processes, such as sales, service, finance, and supply chain, with previews expected later this year or early next year.

Microsoft and Alphabet's latest earnings show once again that it's all about the cloud

Microsoft's cloud business played a big role in driving overall growth for the tech giant in the latest quarter, as more customers used the company's cloud services for their AI-powered platforms and tools. Microsoft cloud revenue in the first-fiscal quarter was $38.9 billion, up 22% year-over-year. Much of that growth came from Microsoft Azure, the company's public cloud computing platform, which saw 33% growth in revenue. Meanwhile, Microsoft 365 Commercial products and cloud services revenue increased 13%, or up 14% in constant currency. Overall, Microsoft's revenue for the quarter ending Sept. 30 was $65.6 billion, a 16% increase, or about $1 billion more than analysts had expected. "AI-driven transformation is changing work, work artifacts, and workflow across every role, function, and business process," Microsoft CEO Satya Nadella said in a statement. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage." In after-hours trading on Wednesday, Microsoft's shares rose just under 1% to $436. Yesterday, Google's cloud business also made a major contribution to the double-digit revenue gains at parent Alphabet, as CEO Sundar Pichai said his huge investment in AI is paying off. The company's cloud revenue for the quarter hit $11.3 billion, an increase of 34%. During a call with analysts, Pichai repeatedly cited the number of people and companies using Google's AI, which runs on its Gemini large language models, in various tools. Encouraged by the cloud results, investors sent Alphabet's shares up nearly 3% in regular trading on Wednesday, to $176.14. Microsoft, Google, and Amazon are in a fierce battle for cloud dominance since it became clear that generative AI could propel growth in cloud services, as developers looked to build and expand the use of generative AI chatbots and other applications in the cloud.

Microsoft Beats Quarterly Revenue Estimates

(Reuters) - Microsoft beat Wall Street estimates for first-quarter revenue on Wednesday as efforts to build out data center capacity and AI-driven demand boosted its cloud business. Shares of the Redmond, Washington-based company rose about 2% in trading after market hours, having gained more than 15% so far this year on the back of a boom in artificial intelligence technologies. The quarterly earnings are Microsoft's first since it restructured the way it reports its businesses to align them more closely with how they are managed. That move has, however, made it harder to estimate the quarter's performance. Azure revenue grew 33%, compared with Visible Alpha estimates for a 32% increase. Earnings per share stood at $3.30, compared with analysts' estimate of $3.10, according to LSEG data. Revenue rose 16% to $65.6 billion in the fiscal first quarter ended September, compared with analysts' average estimate of $64.5 billion, according to LSEG data. (Reporting by Deborah Sophia in Bengaluru and Anna Tong in San Francisco; Editing by Anil D'Silva)

Analysts revisit Microsoft stock price targets after Q1 earnings

Microsoft shares fell sharply in early Thursday trading, dragging tech rivals and major benchmarks lower, after the AI market pioneer hinted that its near-term ambitions for the new technology may be clouded by the costs and timing to bring them online. Microsoft (MSFT) , which lost its place as the world's biggest tech company to Apple (AAPL) earlier this year, and slipped below Nvidia (NVDA) over the past few months, has been one of the worst-performing Magnificent 7 stocks in 2024, rising just 16.6% and trailing the 26% gain for the Nasdaq benchmark. That disappointing performance belies that fact that Microsoft, through its partnership with ChatGPT creator OpenAI, has been at the forefront of the AI investment wave for much of the past two years, with plans to infuse the new technologies across its suite of consumer and business products. "AI-driven transformation is changing work, work artifacts and workflow across every role, function, and business process, helping customers drive new growth and operating leverage," CEO Satya Nadella told investors on a conference call late Wednesday. "All up, our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone," he added. Microsoft capex surge Those plans have come at a hefty cost, however, with Microsoft spending $55.4 billion last year to expand both its physical AI infrastructure and purchase the tens of thousands of chips and processors needed to power the energy-consuming technology. That tally is likely to rise to around $80 billion for its current financial year, analyst estimate, and Microsoft has already laid out $20 billion over the three months ending in September, which is the group's fiscal first quarter. Investors aren't seeing the kind of payoff as yet to justify that kind of outlay, however, and are looking to punish the stock for even a slight miss to Wall Street forecasts. Related: Meta earnings blast forecasts, but Facebook parent sees big capex increase Microsoft posted first quarter earnings of $3.30 per share under its new reporting structure, topping Street estimates of $3.10 per share, while overall revenues rose 16% to $65.6 billion. Growth in the group's flagship Azure cloud division and the epicenter of its AI ambitions, however, came in modestly shy of Wall Street's outlook, with a 33% expansion, and will likely slow modestly into the final three months of the year. Overall group revenues, Microsoft said, will likely rise to $68.6 billion over the current quarter, around $1 billion shy of Wall Street's forecast. Investors need patience "The demand around AI continues to proliferate, outpacing current supply, with an acceleration still expected in the second half of the fiscal year as more infrastructure comes online," said D.A. Davidson Gil Luria analyst Gil Luria. "[However] ... we do not believe that this data center build out war is one that Microsoft can win, as highlighted in our proprietary semiconductor analysis, showing Azure has the least diversity of AI accelerators available compared to [Amazon Web Services] and [Google Cloud], putting them at a significant cost disadvantage," said Luria, who lowered his Microsoft price target by $25, to $425 per share, following last night's update. Barclays Raimo Lenschow, who reiterated his bank's $475 price target and 'overweight' rating on Microsoft shares, also noted that investors are likely to need patience in order to allow for the accelerated AI spending to start bearing fruit. Related: Mag 7 earnings: What to know before Apple, Alphabet, Microsoft, and Meta report results "In the short term, we fear the wait will continue for Microsoft's shares. Short-term supply issues around AI capacity are likely to cause stable Azure consumption trends in Q2 vs. Q1, which is solid but not necessarily a new catalyst that excites investors," Lenschow and his team wrote. "Things should get better in [the second half of Microsoft's fiscal year], but investors will only find out about the magnitude of this re-acceleration in April 2025 when its [third quarter] numbers come out, leaving little to be excited about in the near term," he added. Second half ramp Morgan Stanley analyst Keith Weiss, however, said investors "should see rewards for waiting" through supply constraints that limit growth in its generative AI business. Weiss, who lifted his Microsoft price target by $42 to $548 per share, said the company remains confident it can ramp-up capacity in the second half of the year. "We still expect Azure growth to accelerate from H1 (in the second half of the financial year] as our capital investments create an increase in available AI capacity to serve more of the growing demand," finance chief Amy Hood told investors late Wednesday. Related: Microsoft may have a growing AI problem on its hands Microsoft's broader improvements in its personal computing, productivity and business units, as well as the newly-created Microsoft 365 Consumer cloud unit, also suggest the tech giant's breadth will allow for greater generation of AI-related profits once capacity is able to meet the ongoing client demand, according to CFRA analyst Angelo Zino. Zino, who carries a 'strong buy' rating on Microsoft with a $490 price target, added that the AI contribution to Azure growth is also improving. More AI Stocks: "This figure has been incrementally increasing over the last several quarters as the company builds more AI capacity and organizations invest more heavily in AI workloads," Zino said. "Also near our expectation was growth from the newly created Microsoft 365 Consumer cloud unit, with higher price points tied to AI likely to help support growth rates in future quarters." Microsoft shares were marked 3.8% lower in premarket trading to indicate an opening bell price of $416.15 each, a move that would trim the stock's year-to-date advance to around 10.7%. Related: Veteran fund manager sees world of pain coming for stocks

Microsoft Q1 2025 Preview: 5 Things To Know

Generative AI, copilots, agents, cybersecurity and PCs are among the many topics expected to come up. An update on Microsoft's suite of artificial intelligence offerings, including copilots and agents. Growth in Teams and the productivity application suite. And early signs of an AI PC revolution. These are some of the subjects expected to come up when Microsoft reports earnings for the first fiscal quarter on Oct. 30. The Redmond, Wash.-based tech giant will cover the three months ended Sept. 30. In a quarterly survey of Microsoft VARs, KeyBanc found that 100 percent of respondents said their Microsoft business met or beat expectations, up 14 points quarter over quarter, according to a report in October by the investment firm. "This was paired with a 10-pt increase q/q in Microsoft's strategic importance as a vendor with 74% of respondents seeing a net increase in Microsoft's importance as a vendor," according to the investment firm. [RELATED: Microsoft To Grant Users More Access To Autonomous AI Agent Capabilities] In an October report, Morgan Stanley said Microsoft can meet expectations for about 33 percent growth in Azure, building more confidence for a mid to high 30 percent second-half acceleration. The upcoming quarterly earnings is Microsoft's first since changing how it reports its revenue. An October report from Melius Research points out that Microsoft moved "the slower growing Enterprise Mobility + Security (EMS) and Power BI sales from the 'Intelligent Cloud' segment to 'Productivity and Business Processes."' "The switch boosts the contribution of AI within Azure and its overall growth rate by about 3 percentage points vs. the prior methodology," according to the report. "With the restatement, Azure should accelerate firmly into the mid-to-high thirties now in the back half of FY25 (C1H25) - with a double-digit percentage of the growth driven by AI (much faster growth than both Google and AWS)." In a September report, Melius said that Microsoft should continue to stand out from the steep AI competition. "No one sees more data than the folks in Redmond," according to the firm. "And their vast partner network should only augment their advantage." Here's more of what to expect when Microsoft reports earnings on Wednesday.

Wall Street remains confident on Microsoft's AI story despite weak guidance. Some say to buy the dip

Wall Street's bullish sentiment on Microsoft hasn't faded, even after the tech giant forecast disappointing revenue growth numbers. On Wednesday, Microsoft posted fiscal first-quarter earnings of $3.30 per share on revenue of $65.59 billion, exceeding analysts' expectations of $3.10 in earnings per share on revenue of $64.51, per LSEG. The company's revenue increased 16% year over year in the quarter, and its net income rose 11% during the period compared to the year-ago quarter. But Microsoft also called for revenue to be in the range of $68.1 billion to $69.1 billion for the current quarter, falling short of the $69.83 billion expected by analysts surveyed by LSEG. That forecast led shares to slip nearly 4% in premarket trading, despite the company's strong earnings performance. The stock's up 15% this year. Analysts from several major firms -- including JPMorgan, Bank of America and Morgan Stanley -- kept their overweight or buy-equivalent ratings on the stock after the earnings release. Here's where some of them stand: Bank of America: Reiterated buy and $510 price target, implies 17.9% upside Barclays: Reiterated overweight and $475 price target, implies 9.8% upside Bernstein: Reiterated outperform and raised price target from $500 to $511, implies 18.1% upside Citi: Reiterated buy and $497 price target, implies 14.9% upside Evercore ISI: Reiterated outperform and $500 price target, implies 15.6% upside JPMorgan: Reiterated overweight and lowered price target from $470 to $465, implies 7.5% upside Morgan Stanley: Reiterated overweight and raised price target from $506 to $548, implies 26.7% upside Wells Fargo: Reiterated overweight and $515 price target, implies 19.1% upside Analysts who walked away from the quarterly print enthusiastic about Microsoft's future returns noted the company's already strong demand trends and eventual dominance in artificial intelligence-related technologies. "Demand signals remain strong ... but supply constraints continue to limit growth in the GenAI-related businesses," Morgan Stanley analyst Keith Weiss said in a Thursday note. "That said, with management confident in a 2H capacity ramp and MSFT trading at 25X CY26 GAAP P/E, investors should see rewards for waiting." Microsoft is "by far the best positioned" software company to build a large and durable generative AI-enabled enterprise software business, and best-positioned to gain IT wallet share with those solutions, Weiss added. Weiss, like many analysts, noted that Microsoft management expects the company's generative AI revenue to surpass a $10 billion run-rate in the second quarter of next year, which should drive an acceleration in overall Azure revenue and stabilize Microsoft's M365 Commercial Cloud business. That would be the company's fastest ever AI-related revenue growth rate. Evercore ISI analyst Kirk Materne cited the AI run-rate expectations heading into next year as a reason to be confident about the megacap tech's ability to deliver strong top- and bottom-line growth. "We see weakness in the shares being a buying opportunity ... we believe the long-term trends in the Commercial business remain intact as MSFT continues to take share in Cloud and its AI services continue to scale," Materne said in a note to clients. Citi similarly said it is "buyers of the pullback" and expects a more positive set-up into the following quarter's results as Microsoft ramps up its AI revenue. MSFT YTD mountain Microsoft performance this year. Barclays, which has one of the lowest price objectives on Wall Street, said it sees Microsoft shares being "range bound" in the short term. Analyst Raimo Lenschow noted that second-quarter Azure growth guidance of between 31% and 32% was at the lower end of expectations, but said headwinds are likely temporary. "Investors needs to have faith that the ongoing high Capex investments (~$20bn including leases in Q1) will turn into meaningful revenue in the future," he said in a note to clients. "We are convinced, but can understand how the market may want to see more tangible results."

Investors Want to See a Payout on Microsoft's AI Efforts

Microsoft is expected to report its slowest quarterly revenue growth in a year on Wednesday, while investors await signs of AI demand amid growing worries about the slow payoff from hefty investments in the technology. The software giant is widely seen as the front-runner in the race to capitalize on generative AI, in part thanks to its investment in ChatGPT-owner OpenAI. But recent reports point to slow adoption for its key products including the $30-per-month Copilot assistant for enterprises. There's "a wall of worry" around Microsoft's earnings, Morgan Stanley analysts said, pointing to "ramping capital expenditures, margin compression, lack of evidence on AI returns, and messiness post a financial resegmentation." The results are the first since the company in August rejigged the way it reports its businesses to align them more closely with how they are managed. That move has, however, made it harder to estimate last quarter's performance.

Microsoft and Meta shares fall amid slower growth prospects

Microsoft and Meta reported September quarter earnings that beat market expectations but failed to impress investors with their guidance, sending both shares down more than 3% in after-hours trading. Microsoft's shares were up 16% year-to-date, and Meta stocks rose 68% this year as markets closed on Wednesday. Some similarities in their earnings reports are that both artificial intelligence (AI)-focused businesses have been heavily investing in AI infrastructure, sparking concerns about whether their pace of growth could justify the billions of dollars of spending. Meanwhile, the two Wall Street darlings faced different specific challenges - Microsoft's capacity constraints and Meta's overspending. It seems that they did not satisfy investors with their conservative outlook on the ongoing challenges they are facing. The selloff reaction of the markets may also be due to Alphabet's blow-out earnings results a day ago, as investors had set a high bar of expectations. Microsoft's earnings for its first quarter of fiscal year 2025 show that the growth of its Azure cloud decelerated to 34% year-on-year at constant currency from 35% in the previous quarter. In August, the company revised the June quarter report, transferring some revenue from mobility and security services to Office software. This approach led to a higher revision of Azure's growth rate to 34% from 29% previously. Despite steady growth in its most competitive segment, rivalling Amazon's AWS and Alphabet's Google Cloud, Microsoft provided disappointing guidance, expecting 33% to 32% growth at constant currency for the current quarter, suggesting a further slowdown. CFO Amy Hood said during the earnings call that some data centre capacity Microsoft has been focusing on in its push into AI has not borne fruit as expected due to a shortage in supply, likely constraining revenue growth in the Azure cloud during the December quarter. The risks analysts are concerned about regarding Microsoft are the increasing spending on its AI infrastructure to build their own supercomputing applications. Its quarterly capital expenditures, including assets acquired under capital leases, jumped 79% year-on-year to $20 billion (€18.4 billion), reaching a record high. However, Josh Gilbert, market analyst at Oanda Australia, is optimistic about Microsoft's prospects, stating: "With enterprise spending on cloud services rising, Microsoft seems to be just beginning its AI expansion, and the good times look set to continue." Other key metrics are rather stunning, as the company comfortably topped analysts' expectations. Revenue rose 16% year-on-year to $65.59 billion (€60.45 billion), and earnings per share were $3.30 (€3.04), surpassing the estimated $64.51 billion (€59.45 billion) and $3.10 (€2.9), respectively. "AI-driven transformation is changing work, work artefacts, and workflow across every role, function, and business process," CEO Satya Nadella commented. "We are expanding our opportunity and winning new customers as we help them apply our AI platforms and tools to drive new growth and operating leverage." Meta's third-quarter earnings topped market expectations in key metrics, reporting earnings per share of $6.03 (€5.59) on revenue of $40.59 billion (€37.41 billion), up 37% and 19% from a year ago, compared to analysts' estimates of $5.25 (€4.84) and $40.29 billion (€37.13 billion), respectively. However, its revenue beat was not significant, and the annual net income growth sharply declined to 35% from 70% on average over the past year. This signals that Meta's massive investment in its ambitious AI and metaverse projects has negatively impacted its growth in its core business digital advertising. Now, the social platform expects that fourth-quarter revenue will be in the range of $45 billion (€41.5 billion) to $48 billion (€44.24 billion), with its midpoint slightly beating analysts' expectations. In its outlook statement, Meta expects "the full-year 2024 total expenses to be in the range of $96-98 billion, updated from our prior range of $96-99 billion. For Reality Labs, we continue to expect 2024 operating losses to increase meaningfully year-over-year due to our ongoing product development efforts and investments to further scale our ecosystem." CEO Mark Zuckerberg also warned during the earnings call that Meta will continue to spend significantly on AI infrastructure for its Reality Labs and AI glasses. He believes artificial intelligence will accelerate its core business - advertising revenue growth - in the long term. "There are lots of opportunities to use new AI advances to accelerate our core business," Zuckerberg said. Despite both companies comfortably beating earnings expectations, concerns over rising costs and cautious growth outlooks have left investors uncertain about their future performance.

Microsoft stock stays a long-term winner as Azure and AI scale up, says Evercore By Investing.com

On Thursday, Evercore ISI maintained its Outperform rating on Microsoft Corporation (NASDAQ:MSFT) stock with a steady price target of $500.00. The decision comes after Microsoft announced F1Q results that surpassed expectations, showcasing a robust 16% growth in its M365 Commercial Cloud and a 34% increase in Azure growth on a constant currency (c/c) basis. Despite the strong performance, Microsoft's shares faced some downward pressure after-hours due to Azure's growth aligning closely with the anticipated 33% increase, as in-period revenue recognition contributed a 1-point boost. The guidance for Azure was slightly below market expectations, projected at 31-32% compared to the forecasted 32-33%. This conservative outlook is attributed to the deferment of some AI capacity to the second half of the fiscal year. Nonetheless, Evercore ISI suggests that Azure consumption will likely maintain stability from F1Q to F2Q. Microsoft has reaffirmed its prediction for Azure's accelerated growth in the latter half of the fiscal year, hinting at potential share purchasing opportunities. This is bolstered by the anticipation that Microsoft's AI services will achieve a $10 billion run-rate in F2Q and experience a significant increase in capacity and adoption by calendar year 2025. Investors have expressed concerns regarding the level of capital expenditure, which could impact gross margins. However, Evercore ISI believes that Microsoft is capable of balancing operating expenses to mitigate these concerns. The firm concludes that Microsoft's long-term prospects in the Commercial sector remain promising, as the company continues to expand its cloud market share and scales its AI services. The expectation is for Microsoft to sustain strong growth in both revenue and earnings, supporting the reiterated Outperform rating and $500 price target. In other recent news, Microsoft Corporation has been the focus of several analyst adjustments. DA Davidson revised its price target for the tech giant to $425 from $475, while maintaining a Neutral rating. This follows Microsoft's recent Q1 2025 earnings report, which showed a slowdown in Azure cloud services growth, a trend expected to continue into the next quarter. Despite this, DA Davidson anticipates growth acceleration in the latter half of the fiscal year as Microsoft expands its infrastructure. Citi, on the other hand, maintained its Buy rating on Microsoft with a steadfast price target of $497, despite acknowledging mixed quarterly performance. The firm expects potential upside to their projections for Azure's growth in the latter half of the year. Barclays (LON:BARC) also reiterated its Overweight rating on Microsoft, with a steady price target of $475, expressing confidence in Microsoft's strategy despite short-term supply issues impacting AI capacity. In recent developments, Microsoft reported a 16% increase in revenue to $65.6 billion for the fiscal first quarter, exceeding Wall Street projections. This has been attributed to the company's expansion in data center capacity and rising demand for AI technologies. However, the company's second-quarter guidance fell short of analyst expectations due to new capacity constraints related to a collocation partner, potentially slowing Azure's growth. Tech giants Microsoft and Meta (NASDAQ:META) have announced increased investments in AI data centers, sparking concerns among investors. Microsoft's capital spending rose 5.3% to $20 billion in the first fiscal quarter, surpassing its entire annual expenditure up until fiscal 2020. Despite these concerns, both Microsoft and Meta emphasized the early stage of the AI cycle and highlighted the long-term potential of AI technology. Microsoft's strong financial performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's revenue growth of 15.67% over the last twelve months aligns with the robust 16% growth in M365 Commercial Cloud mentioned in the report. This growth is complemented by an impressive EBITDA growth of 26.68% over the same period, indicating Microsoft's ability to scale efficiently. InvestingPro Tips reveal that Microsoft has raised its dividend for 19 consecutive years, demonstrating a commitment to shareholder returns. This is particularly relevant given the company's strong financial position and growth prospects in AI and cloud services. Additionally, Microsoft is noted as a prominent player in the Software industry, which supports Evercore ISI's optimistic outlook on the company's long-term prospects in the Commercial sector. For investors seeking a deeper understanding of Microsoft's valuation and growth potential, InvestingPro offers 14 additional tips. These insights could provide valuable context for assessing the company's $500 price target and its position in the evolving AI and cloud computing landscape.

Microsoft 'In Major Growth Mode,' Not Slowing Down: 4 Analysts See Strong Azure Demand, AI Monetization Efforts - Microsoft (NASDAQ:MSFT)

With weaker than expected guidance, analysts lower estimates but see the outlook conservative and a short-term setback. Microsoft Corporation MSFT analysts saw potential short-term setbacks with capacity constraints and weaker guidance than expected but were also looking at an exciting path for AI monetization ahead after first-quarter financial results. The Microsoft Analysts: Bank of America analyst Brad Sills reiterated a Buy rating on Microsoft with a $510 price target. Wedbush analyst Daniel Ives maintained an Outperform rating with a $550 price target. Piper Sandler analyst Brent Bracelin maintained an Overweight rating with a $470 price target. Goldman Sachs analyst Kash Rangan reiterated a Buy rating with a $500 price target. Bank of America on MSFT: Strong growth of 34% for Microsoft's Azure beat an estimate of 33%, but the segment's future may be impacted by capacity constraints, Sills said in a new investor note. Sills lowered financial estimates on the updated guidance, while he noted the outlook could be conservative from the company. "We view second-quarter results as solid across the core Azure and Office growth businesses, though tempered by a softer second quarter outlook," Sills said. The analyst said the lowered outlook is not "a demand issue" and the second half of the fiscal year could see a reacceleration. Wedbush on MSFT: The first-quarter earnings report helped make Ives more bullish on the stock, with AI monetization the key for the future. Ives said the Azure growth of 34% including a 12% positive impact from AI showed the "massive growth tailwinds" the company is seeing. The analyst disagreed with shares trading down after the report on concerns for the second quarter outlook. "The new Azure reporting standards have moved Street numbers all around and a slight decel is totally expected by many investors," Ives said. "We would be strong buyers of MSFT on any weakness." Ives called the AI growth a "once in a 40-year tech transformation" and highlighted Microsoft's expected annual revenue run rate of $10 billion for AI in the next quarter. "The bears will try to split hairs on any number but ultimately this is a tech stalwart in major growth mode ... and we see no signs of slowing down." Piper Sandler on MSFT: The quarterly results and outlook were a mixed bag for Bracelin, who is lowering earnings per share estimates and raising revenue estimates after the report. "Our model reboot last week proved to be too conservative and are encouraged that demand continues to outstrip supply," Bracelin said. The analyst saw a second-half acceleration in Azure growth. Accounting recognition of Microsoft's OpenAI investment could temporarily drag earnings per share figures, the analyst added. Goldman Sachs on MSFT: The narrative on Microsoft's financials could shift from higher CapEx concerns to the AI revenue opportunity, Rangan said in a new investor note. The analyst saw lower Azure growth guidance and the negative impact to earnings from the OpenAI accounting issues as short-term items. "We don't believe the value added by the OpenAI relationship is being fully reflected in the current valuation, despite the stock bearing the expense load," Rangan said. The analyst said investors should shift their focus from cost concerns for the OpenAI investment to the revenue opportunities. Microsoft's build-out of Azure could also help the company's roadmap on how to work through high costs for a new product cycle, the analyst added. "We believe Microsoft is one of the most compelling investment opportunities in the technology industry and across sectors." MSFT Price Action: Microsoft stock is down 5.51% to $408.72 on Thursday versus a 52-week trading range of $339.66 to $468.35. Microsoft stock is up over 10% year-to-date in 2024. Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

Microsoft, Meta to Feel AI Scrutiny as Investors Wait for Payoff

Ever-growing scrutiny from investors over when the billions spent on artificial intelligence will flow through to sales and profit is set to dominate when Microsoft Corp. and Meta Platforms Inc. report earnings later Wednesday. Capital expenditure at Microsoft is estimated at about $14.6 billion in the last quarter, a jump of more than 45% from a year earlier, according to estimates compiled by Bloomberg. At Meta, spending is projected to have soared by almost 70% to $11 billion.

DA Davidson trims Microsoft target, notes Azure slowdown but AI demand remains strong By Investing.com

On Thursday, DA Davidson adjusted its outlook on Microsoft Corporation (NASDAQ:MSFT), reducing the price target to $425 from the previous $475 while maintaining a Neutral rating on the stock. This revision follows the release of Microsoft's first-quarter fiscal year 2025 earnings, which highlighted a slowdown in the growth of its Azure cloud services. The firm anticipates this deceleration to persist into the next quarter. The reported earnings revealed that while Azure AI Services' contribution to Azure's overall growth had increased, the growth from non-AI segments of Azure had seen a slight decline. Despite the current slowdown, the demand for AI technology is burgeoning, surpassing the available supply. DA Davidson noted the expectation of growth acceleration in the latter half of the fiscal year, as Microsoft is set to expand its infrastructure. The analyst from DA Davidson pointed out the mixed results within Microsoft's cloud business. The increased reliance on Azure AI Services indicates a shift in the company's growth drivers within the cloud sector. However, the decrease in non-AI related growth suggests a broader deceleration in other areas of the cloud business. Microsoft's management has also acknowledged the trend of decelerating growth in Azure, and they are preparing for this to continue into the following quarter. The tech giant's strategy includes a focus on scaling up its infrastructure to meet the growing demand for AI services. The price target adjustment reflects the firm's cautious stance on Microsoft's near-term growth prospects, especially in the context of Azure's performance. DA Davidson's maintained Neutral rating indicates a wait-and-see approach, as the market watches for Microsoft's next moves in response to the evolving demand for cloud and AI services. In other recent news, Microsoft Corporation delivered a notable financial performance, exceeding Wall Street's revenue expectations with a 16% rise to $65.6 billion. The increase is attributed to the expansion of its data center capacity and a surge in demand for AI technologies. However, the company's second-quarter guidance fell short of analyst expectations, largely due to new capacity constraints related to a collocation partner, which could potentially slow Azure's growth. Despite these constraints, Citi maintains a Buy rating on Microsoft with a $497 target, while Barclays (LON:BARC) reiterated its Overweight rating with a $475 target. Both firms expect a potential re-acceleration in Azure's growth in the second half of the year. Jefferies also reaffirmed its Buy rating, projecting around 33% year-over-year growth for Azure. Recent developments indicate a significant increase in AI investments by tech giants like Microsoft and Meta (NASDAQ:META). Microsoft's capital spending rose by 5.3% to $20 billion in the first fiscal quarter, surpassing its entire annual expenditure up until fiscal 2020. However, these increased investments have sparked concerns among investors, primarily due to the potential impact on future margins. Furthermore, Microsoft, along with other major companies like Meta and Alphabet (NASDAQ:GOOGL), reported increased costs associated with AI, causing some investor apprehension. Despite these concerns, the companies emphasized the early stage of the AI cycle and the long-term potential of AI technology. Microsoft's recent financial performance and market position offer additional context to DA Davidson's analysis. According to InvestingPro data, Microsoft boasts a substantial market capitalization of $3.22 trillion, underlining its position as a tech industry heavyweight. The company's P/E ratio of 36.65 suggests that investors are willing to pay a premium for its shares, reflecting confidence in future growth prospects despite the recent Azure slowdown. InvestingPro Tips highlight Microsoft's strong financial health and consistent performance. The company has raised its dividend for 19 consecutive years, demonstrating a commitment to shareholder returns. This is particularly noteworthy given the current focus on Azure's growth deceleration. Additionally, Microsoft's cash flows sufficiently cover interest payments, indicating a solid financial foundation that could support continued investment in AI and cloud infrastructure. While DA Davidson has adjusted its price target, it's worth noting that Microsoft's revenue growth remains robust at 15.67% over the last twelve months. This, coupled with a high gross profit margin of 69.76%, suggests that the company maintains strong profitability even as it navigates the evolving cloud and AI landscape. For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips on Microsoft, providing deeper insights into the company's financial health and market position.

Wedbush 'more bullish' on Microsoft, despite earnings noise By Investing.com

Investing.com -- Wedbush analysts said they feel "more bullish" on Microsoft's (NASDAQ:MSFT) stock despite the noise that emerged following the tech giant's latest earnings report. The company reported first-quarter results above market expectations, with Azure's year-over-year constant currency growth at 34%, beating forecasts by 100 basis points. AI-driven growth played a substantial role, contributing a 12% boost compared to 8% in the previous quarter, highlighting the strong AI monetization trends benefiting Microsoft's core cloud business. Despite these figures, shares fell more than 3% in premarket trading Thursday as the December quarter guidance for Azure's constant currency growth came in at 31%-32%, lower than what some bullish investors had anticipated. Commenting on this, Wedbush analysts led by Dan Ives said they "disagree with this initial take." They note that the new Azure reporting standards "have moved Street numbers all around and a slight deceleration is totally expected by many investors with some supply constraints and reacceleration in 2H25 and we would be strong buyers of MSFT on any weakness this morning." The investment firm reiterated an Outperform rating on Microsoft stock with a price target of $550. Wedbush highlights that headline numbers for December were strong, especially in the core Intelligent Cloud segment. Any softness stemmed from PC demand, which Ives and his team see as "background noise" within the broader cloud and AI growth narrative. "We come away from this quarter more bullish (not less) after seeing this AI growth and Copilot monetization play out in real time for Microsoft. The bears will try to split hairs on any number but ultimately this is a tech stalwart in major growth mode," analysts continued. Brett Iversen, Microsoft's VP of Investor Relations, confirmed that the company won't be able to address its AI capacity limitations until the second half of its fiscal year. This may be another factor contributing to today's negative premarket price action.

Big Tech's AI spending isn't crazy, in a vacuum

NEW YORK, Oct 29 (Reuters Breakingviews) - Microsoft (MSFT.O), opens new tab, Meta Platforms (META.O), opens new tab and Alphabet (GOOGL.O), opens new tab will all report quarterly earnings this week. The main attraction for investors is their investment plans for artificial intelligence. All three companies are expected to ramp their spending by 40% or more this year, and each decision is defensible enough on its own. The problem is, the return expectations can be compounding. Satya Nadella's Microsoft, for example, will spend over $50 billion on capital expenditure this calendar year, according to analyst estimates collected by LSEG, or $29 billion more than it spent in 2021. If Microsoft wants a 20% return on the additional investment, it'll need to make about $6 billion of additional profit after tax. At Microsoft's roughly 40% operating margin and the statutory corporate tax rate, that means $21 billion of revenue, or 8% more than estimated this year. Meta and Alphabet's investments give similar results. On the face of it, growing the top line by that much seems like an achievable goal. If the economic impact of AI is $15.7 trillion by 2030, as PwC estimates, opens new tab, then these companies have no choice but to chase the opportunity. And just the sheer size of the estimate suggests there's more than enough to go around. Snag is, all three companies, and more, are gunning for the same revenue pot. If a company, say OpenAI, can create a system which is better than rivals on generalized tasks, it would probably dominate the market leaving scraps for others, much like Google in the search market. And if there's not much of a difference between systems, or developers give away their models, AI could become a low-margin business, outside of running data centers. Plus the implied revenue growth reflects just one year of investment. Over time, return expectations are heaped on top of each other. That's in addition of an environment where capex is already increasing faster than revenue. Companies have had an easy enough time convincing shareholders that the investment is worthwhile. A few years into the boom, though, and AI is still more promise than reality. Follow @rob_cyran, opens new tab on X CONTEXT NEWS Alphabet will report third quarter earnings on Oct. 29. Microsoft and Meta Platforms will announce their quarterly earnings on Oct. 30. Editing by Lauren Silva Laughlin and Pranav Kiran Breakingviews Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time. Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

What to expect from Meta Platforms, Microsoft earnings after the bell

Another busy day of megacap technology earnings kicks off Wednesday with results from Meta Platforms and Microsoft after the bell. Capital expenditures spending remain top of mind for investors this reporting season after concerns about the payoffs from artificial intelligence investments dented sentiment and pressured the behemoths earlier this year. Those concerns haven't dissipated, with D.A. Davidson analyst Gil Luria noting that capex figures are the "best indicator of NVDA demand." Citi's Ronald Josey thinks that these projections could, however, come in on the conservative side. Wall Street expects Meta Platforms to post third-quarter earnings of $5.25 per share, up from $4.39 a year ago, per LSEG. Revenues are expected to come in at $40.29 billion, reflecting 18% year-over-year growth. For Microsoft, EPS and revenues are expected to reach $3.10 and $64.51 billion, respectively, in the fiscal first quarter . The revenue estimate implies about 14% growth from the year-ago period. Meta Platforms For Meta Platforms, analysts are hunting for signs that AI is continuing to boost the company's core product and advertising spending. Citi's Josey named it a top pick due to strong engagement trends, profitability and a growing suite of products. Evercore ISI's Mark Mahaney expects the social media behemoth to top estimates in part due to a strong Internet advertising environment. He also views Wall Street's operating margin expectations as "reasonable." The firm also expects the company to maintain its full-year 2024 total expense and capital expenditure guidance, anticipating that Meta will refrain from offering up a 2025 outlook. META YTD mountain Shares this year Rosenblatt's Barton Crockett views the high end of Meta's third-quarter guide as attainable due to ongoing tailwinds from AI innovation and a lift to advertising return on investment. He noted that the company has met or come within 1% of the high end of its next quarter guide over the last year and a half. "Meta has replaced Google as the set-it-and-forget-it blue chip holding offering investors (1) a growing, healthy core business, (2) an AI winner story with lower terminal risk, and (3) a shareholder friendly management team," wrote Bernstein's Mark Shmulik. The analyst reiterated his outperform rating and boosted his price target to $675 a share, reflecting about 14% upside from Tuesday's close. Shmulik views market concerns surrounding capex as "overdone," saying that the company can post a solid return on invested capital even as it boosts investments. Along with new AI tools and higher advertising spending, Bank of America's Justin Post anticipates upside from growing Reels and messaging monetization. Political advertising ahead of the election cycle may also drive 100 to 200 basis points of upside, he added. Microsoft Microsoft faces a tougher bar headed into the print, with many analysts leaning toward caution as the company lags some of its megacap peers and underperforms the Nasdaq Composite. Shares have gained about 16% this year, while the Nasdaq has soared nearly 25% and hit new highs as of late. Earlier this month, BMO Capital Markets removed the stock from its top picks list, citing limited upside over the short run. Capex and commentary surrounding AI monetization and insight into Azure's reacceleration will be in focus as investors demand more signs of a payoff. "Feedback for M365 Copilots remains muted, which we think limits revenue upside for PBP (pre re-classification)," wrote BMO analyst Keith Bachman. "Also, we think elevated capex and depreciation will limit margin expansion, as we have previously written." Citi's Tyler Radke trimmed the firm's price target on the stock to $497 from $500 a share, representing 15% upside from Tuesday's close. He views the report as a potential "clearing event" for the stock given the lackluster expectations heading into the print. MSFT YTD mountain Microsoft year-to-date performance In fact, dour sentiment and share underperformance create an attractive setup for the company as Azure growth and demand stabilize, said Morgan Stanley's Keith Weiss. "We remain confident in the magnitude of estimate upside driven largely by Azure, as traditional workload growth appears more de-risked following the volatility of last quarter and the AI demand is firmly building ahead of the F2H capacity unlock," Weiss wrote. Goldman Sachs analyst Kash Rangan also remains optimistic on the stock and lifted capex estimates, saying the company is accurately "matching investments with tangible demand. Segment changes at the company also lower the stakes for Azure's reacceleration. The analyst maintained his $500 price target and buy rating, reflecting nearly 16% upside from Tuesday's close He's hunting for signs of growing AI revenues and demand superseding capacity. "We expect outperformance to be driven by further AI contribution to growth, broader share gains vs. hyperscaler competitors, and increased appetite to pay for high ROI services and new projects as the market gains certainty on rates and the U.S. election as the year progresses," he wrote.