Microsoft (MSFT.O) Open in new tab When the technology group reports earnings on Tuesday, investors will face one big question: Is the growth of its Azure cloud computing business worth it? Spending billions of dollars to build AI infrastructure? Microsoft is said to be the first company to make money in artificial intelligence thanks to its partnership with ChatGPT developer OpenAI, and it is expected to show the growth of the Azure quarter soon. That figure dropped to 31% between April and June, according to Visible Alpha Data.
This was in line with the company’s forecast, but investors had expected a bigger contribution from the artificial intelligence business in the fiscal fourth quarter, which accounted for 7% of Azure’s growth in the first three months of the year. A survey of 16 analysts conducted by the London Stock Exchange Group (LSEG) predicts that Microsoft’s capital expenditures will increase by 53% annually to $13.64 billion over the period. That’s a big increase from last year’s $10.95 billion in federal spending. In signs of optimism on Wall Street, US stocks were weighed down by concerns that tech giants’ investments in data centers will not pay off in the short term. The way plants are planted.Shares of Google parent Alphabet ( GOOGL.O ) fell more than 5% last week after the company reported monthly earnings that missed expectations. $1 billion, as AI profits continue to grow, thanks to acquisitions by major tech companies.
Alphabet said monthly capital spending will remain at $12 billion or more through the remainder of 2024.– Investors are very concerned about Microsoft’s ability to continue to accelerate revenue growth, especially in businesses related to artificial intelligence. “If revenue growth can’t keep up with spending, investors may be disappointed,” said Gil Luria, chief software analyst at Microsoft in Davidson. Microsoft said it now needs to invest in data centers to overcome capacity constraints that are hampering its ability to harness the needs of artificial intelligence.
He shares that vision with other tech companies, including Alphabet. Sundar Pichai, CEO of parent company Google, said last week that “the risks of investing too little [in AI infrastructure] are greater than the risks of investing too much.”
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The increased spending will allow Microsoft to capture more business from its large enterprise customer base by offering broader access to its artificial intelligence cloud services and launching features such as the 365 Copilot Assistant for Word and Excel.Microsoft says that half of the Fortune 500 companies use its $30-a-month Copilot service, which can condense large volumes of emails into a few key points or quickly complete them. checklists. Computer code.
However, the technical group of Redmond, Washington did not reveal the financial contribution of the service, and analysts believe that the impact of Copilot will become clearer in the second half of 2024. Think from the customer’s side – More Companies have access to apps like ChatGPT, Microsoft stays active by using its integrated platform.
Microsoft shares have risen about 13% this year, adding more than $350 billion to the company’s market value. The spot hit an all-time high on July 5, but has fallen nearly 9% amid a recent technical selloff. This performance has outpaced the S&P 500’s gain of 14.5% this year. The company said it grew 14.6% between April and June, compared to a 17% increase in the previous quarter. This is primarily due to the slow growth of the PC business, including the Windows and Xbox gaming divisions. The products business – home to the Office suite, LinkedIn and 365 Copilot – is expected to grow 10%
