Microsoft (MSFT) is scheduled to report fourth-quarter earnings after the close of trading on Tuesday, and Wall Street continues to look for signs that a wave of massive AI investments by big tech companies is starting to pay off.
Microsoft is expected to report earnings of $2.94 a share on revenue of $64.5 billion for the current quarter, according to data compiled by Bloomberg. The company reported earnings of $2.69 a share on revenue of $56.2 billion in the same period last year.
Cloud revenue is expected to reach $36.8 billion, with intelligent cloud revenue, which includes Azure, expected to reach $28.7 billion.
Last QuarterMicrosoft said AI services drove 7 percentage point growth in revenue from Azure and other cloud services, up from 6 percentage points in the second quarter and 3 percentage points in the first quarter. The company first began reporting AI contributions in the fourth quarter of last year, saying at the time that AI contributed 1 percentage point to Azure growth.
Microsoft shares are up 13% since the beginning of the year.
Microsoft’s report follows one from rival and Google’s parent company Alphabet.Google, Google) Last week’s earnings announcementThe company said its cloud revenue is growing, driven in part by interest in its AI products.
Still, Google hasn’t provided specific numbers on the impact of AI on its cloud business, leading some analysts, including Steven Ju of UBS Global Research, to predict that the revenue benefits from the company’s AI spending may not be seen until the first half of 2025 at the earliest.
“Our checks on Microsoft remain strong this quarter as we believe the Redmond-led AI wave will accelerate Azure cloud deal flow, with strong momentum into 2024 and the remainder of 2025,” Wedbush analyst Dan Ives wrote in an investor note ahead of Microsoft’s announcement.
Microsoft is also taking market share from Google and Amazon, according to UBS Global Research analyst Carl Keirstead.
“In terms of market share shifts between AWS, Microsoft Azure, and Google Cloud, the most consistent theme in our survey was the number of customers and partners who noted that Microsoft gained share due to its early lead in AI,” Keirstead said in a recent note on the big three cloud players.
“This has been a recurring theme in our research over the past 6 to 12 months and we felt the comments about Azure’s relative strength were consistent with our previous research,” he added.
Beyond how much money Microsoft is making from AI, investors will want to know how much the company plans to invest in the technology going forward. In the third quarter, Microsoft reported capital expenditures of $14 billion as it continues to build out its AI infrastructure.
During Alphabet’s earnings call, CFO Ruth Porat said the company spent $13 billion on capital expenditures, up from $12 billion in the previous quarter, adding that most of that spending was directed toward AI.
Amazon(Amazon) is scheduled to announce its results on August 1st.
Google shares have risen 22% since the beginning of the year, while Amazon’s shares have risen 23%.
Contact Daniel Howley at [email protected]. Follow him on Twitter. Daniel Howley.
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