Microsoft is expected to release data on Wednesday, October 30, on the slowest growth rate of quarterly revenue in a year.
At the same time, investors expect that the mentioned data will contain signs of demand for artificial intelligence. The corresponding focus of attention is largely because recently there has been an increase in concern about the slow payoff from massive financial injections into the machine intelligence industry. Also, in this case, it is worth noting that investors in the context of interaction with the area of artificial intelligence face the problem of a kind of uncertainty. AI has significant potential and has already demonstrated impressive cognitive abilities, but at the same time, there is still no clear understanding of what form of existence virtual thinking systems will have at the peak of their technological evolution and when this highest stage of development will be reached. Unknown unequivocally is not a positive investment backdrop.
Microsoft is currently one of the leaders of a kind of race to capitalize on generative artificial intelligence. The most large and significant action of the technology giant as part of the relevant efforts was the investment in OpenAI, the developer of the world’s most popular chatbot called ChatGPT.
At the same time, Microsoft’s latest performance indicators indicate a slow adoption of its major products, including the $30-per-month Copilot assistant for enterprises.
Morgan Stanley analysts said there is what they called a wall of worry around the technology giant’s earnings, which points to ramping capital expenditures, margin compression, lack of evidence on artificial intelligence returns, and messiness post a financial resegmentation.
It is worth noting that in August Microsoft rejigged the way it reports its businesses to align them more closely with how they are managed. At the same time, this action has complicated the assessment of the company’s performance over the past quarter.
Since the last publication of information about the technology giant’s earnings at the end of July, its shares have risen by only 1%, widely underperforming the benchmark S&P 500. At the same time, for the year, the value of Microsoft equities increased by about 14%.
According to analysts polled by Visible Alpha, Microsoft’s Azure cloud-computing unit revenue for the first fiscal quarter ended September 30 probably increased by 33%. It is worth noting that this result is in line with the company’s expectations but below the figure recorded for the previous quarter.
The contribution of artificial intelligence to Azure has grown, however, the overall business has slowed. In July, Microsoft said about the expectation of accelerating the upward dynamic of this unit in the second half of the fiscal year.
Analysts who were interviewed by LSEG predict that the technology giant’s total revenue in the fiscal quarter ended in September will be fixed at $64.51 billion. In this case, it implies an increase in the mentioned indicator by 14.1%.
Microsoft has already warned that its artificial intelligence spending will remain high. It is worth noting that the company’s competitors are also making massive financial injections into the AI industry, which contains significant potential, both in a technological context and in terms of potential financial indicators.
According to Visible Alpha, Microsoft’s capital spending in the fiscal quarter ended in September increased by 71.7%, reaching $19.23 billion.
Copilot has not taken off the way that the technology giant expected. The results of a survey of 152 firms operating in the information technology area testified that the vast majority of them had not progressed their Copilot initiatives past the pilot stage. The relevant information was made public by research company Gartner in August.
At the same time, according to media reports, some analysts believe that Microsoft’s new solutions, including the possibility of creating autonomous artificial intelligence agents capable of performing routine tasks without human intervention, can boost the adoption of Copilot.
Melius Research analyst Ben Reitzes stated that most investors seem skeptical of 365 Copilot adoption since they aren’t using it personally very much. However, according to the expert, it seems Copilot data points are getting modestly better. Also, in this context, the analyst noted that the digital assistant has an increasingly improving customer list.
Bernstein’s Mark Moerdler, among the top-rated analysts for the company, according to LSEG, predicts that Microsoft’s productivity and business processes unit, which develops products such as Office line, LinkedIn, and 365 Copilot, will show revenue growth of 12% for the fiscal quarter ended in September. The expert also expects that the corresponding indicator of intelligent cloud, which houses Azure, will increase by 20% for the same period. According to the analyst, the revenue growth of the personal computing unit, which includes Windows and gaming, is likely to accelerate against the background of stabilization of the personal computer market.
As we have reported earlier, Alphabet’s Q3 Revenue Growth Reportedly to Slow.
