Microsoft will release its quarterly results this week, which will shed light on the trajectory of the artificial intelligence sector. ‘Euronews Business’ highlights the key metrics that investors should look at.
Microsoft will present its results for the first quarter of fiscal year 2025 after the US markets close on October 30. The pioneering company in artificial intelligence (AI) launched ChatGPT in early 2023, triggering a global race in the field of Generative AI driven by the so-called ‘Large Language Models’ (LLM). Since then, its technological rivals (Alphabet and Amazon) have intensified competition in services in the cloud based on AI.
Microsoft is the third largest company in the world, with a market valuation of 3.18 trillion dollars (2.94 trillion euros), behind Apple and Nvidia. Its shares are up 15% so far this year, underperforming most tech giants due to disappointing June quarter earnings due to slowing cloud growth.
In upcoming earnings report, investors will closely monitor Microsoft’s growth in cloud services Azurewhich is the core segment that helps the tech giant compete with its rivals. The second key aspect will be your spending on construction of data centersas rising costs could reduce profit margins.
Key Metric: Cloud Services
Microsoft’s Azure and other cloud services segment represents almost 60% of total revenue of the company, making it essential for Microsoft’s growth. Azure occupies the second place in the world in market share, behind Amazon Web Services (AWS) and followed by Google Cloud. Investors consider this segment fundamental to Microsoft’s competitiveness.
In the fourth quarter of fiscal year 2024, its Intelligent Cloud segment recorded revenues of $28.51 billion (€26.37 billion), which represents a 19% year-on-year increasedriven by 29% growth in Azure and other cloud services. However, Azure’s growth fell short of analyst expectations in that quarter, as the pace slowed from the low-mid 30% range recorded in previous quarters.
According to FactSet, revenue from the smart cloud segment is expected to reach $26.8 billion (€24.78 billion) in the September quarter, up 10% from a year earlier, indicating a new slowdown. Some analysts expect Azure and other cloud services to grow in the low-mid 30% range, which would be a slight sequential increase from the July quarter. However, the company may have to deliver a significant earnings surprise in this segment to justify its growing investment in AI infrastructure.
Additionally, analysts expect Microsoft to present a earnings per share of 3.1 dollars (2.9 euros) about overall income of 64,570 million dollars (59,710 million euros), which reflects an annual growth of 3.7% and 14%, respectively. The forecast figures also suggest a slight slowdown in overall revenue growth, down from 15% in the July quarter.
AI Spending Expected to Continue Rising
Microsoft has previously noted that it faces capacity issues. Chief Financial Officer Amy Hood mentioned that the company has increased investment in data center infrastructure to meet the growing demand for AI training. In June quarter forward-looking statements, the tech giant acknowledged “significant investments in products and services that may not achieve expected returns” as capital spending rose to $19 billion (€17.5 billion) from $16 billion. million in the March quarter.
CEO Satya Nadella said: “As a platform company, we are focused on meeting the mission-critical needs of our customers through our platforms at scale today, while ensuring lead the AI era“.
Copilot Updates
One of the highlights of Microsoft’s upcoming earnings report could be updates to its autonomous agent Copilotan AI-powered assistant that users can create in Copilot Studios. According to Microsoft, it “understands the nature of your work and acts on your behalf,” as revealed during an AI Tour in London earlier this month.
AI agents can simply answer questions or be completely 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 ten new autonomous agents for business processes, such as sales, services, finance and supply chain, with advances planned for the end of this year or early next year.
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