Microsoft on Tuesday missed Wall Street estimates for quarterly growth of its computing service in the Azure clouda further sign that Big Tech may be slower to benefit from heavy spending on AI technology.
The company’s shares plunged 7% in after-hours trading and triggered a sell-off in major technology stocks, with Amazon.com Inc. and Nvidia down 4.5% and 10%.
Microsoft shares have risen almost 25% in the past 12 monthsbecause the company is considered a pioneer in the AI race thanks to its investments in OpenAI, manufacturer of ChatGPT.
But some of that investor enthusiasm has given way in recent weeks to concerns that tech giants’ rampant spending on AI infrastructure will bear little fruit in the short term have sent Microsoft shares down nearly 6% this month.
Microsoft’s balance sheet missed Wall Street estimates
Microsoft said that Revenue from its intelligent cloud unit – home of the Azure computing platform – rose to $28.5 billion in the quarter ended June 30.less than analysts’ estimates 28.680 billion dollars, according to data from LSEG.
Azure revenue rose 29%, below market research firm Visible Alpha’s estimate of 30.6% growth. Microsoft does not break out absolute revenue figures for Azure, the part of its business best positioned to capitalize on the growing interest in AI.
The loss occurs while the Windows manufacturer is investing billions of dollars in data centers to prepare for a potential surge in demand for AI services.
The company’s capital expenditures, including financial leases, rose 77.6% in the quarter to $19 billion, also up sharply from $14 billion in the previous three months.
Microsoft has said the spending was necessary to expand its global network of data centers and overcome capacity constraints that were hampering its efforts to meet AI demand. Its chief executive, Satya Nadella has pushed the company to invest in this technology, incorporating AI into almost all of its products, from the Bing search engine to productivity programs like Word.
Much of those efforts have been driven by technology. OpenAI, which Microsoft has invested some $13 billion in, including the 365 Copilot assistant for businesses, which costs $30 a month and became widely available last year.
Microsoft – considered a bellwether of the tech industry thanks to its vast business – said it Total revenue rose 15% to $64.7 billion in the quarter through June, its fourth fiscal quarter. Analysts had expected $64.39 billion, according to LSEG data..
Source: Ambito
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