Microsoft Poised to Report Q4 Earnings Amid AI Boom

Microsoft (MSFT) is set to announce its fiscal fourth-quarter earnings after the market closes on Tuesday. Wall Street will closely monitor the impact of the company’s significant AI investments. This report follows a trend among Big Tech firms, where AI-driven growth is increasingly under scrutiny.

According to data, Microsoft is anticipated to report earnings per share (EPS) of $2.94 on revenue of $64.5 billion for the quarter. This compares to EPS of $2.69 on revenue of $56.2 billion during the same period last year, reflecting substantial growth. Cloud revenue is projected to reach $36.8 billion, with Intelligent Cloud revenue, which includes Azure, expected to hit $28.7 billion.

In its previous quarter, Microsoft highlighted that AI services contributed 7 percentage points to revenue growth for Azure and other cloud services. This increased from 6 percentage points in Q2 to 3 percentage points in Q1. The company reported AI contributions in Q4 last year, stating that AI added 1 percentage point to Azure’s growth. This steady increase underscores the growing significance of AI in Microsoft’s business model.

Microsoft shares have climbed 13% year to date, indicating investor confidence in the company’s AI strategy and overall growth.

Microsoft’s earnings report follows Alphabet’s (GOOG, GOOGL) recent earnings announcement. Alphabet reported an uptick in cloud revenue, partly due to interest in AI products. However, the company did not provide specific figures on AI’s impact, leading some analysts, like UBS Global Research’s Stephen Ju, to speculate that the revenue benefits from AI spending might not materialize until the first half of 2025.

Wedbush analyst Dan Ives expressed optimism about Microsoft’s position in the AI space, noting robust checks and an accelerating cloud deal flow for Azure, driven by the AI wave. He expects this momentum to continue into 2024 and 2025.

UBS Global Research analyst Karl Keirstead observed that Microsoft has gained market share from both Google and Amazon in the cloud space. Keirstead noted that customers and partners consistently cited Microsoft’s early lead in AI as a significant factor in these market share gains. This trend has been apparent over the past 6-12 months, with Azure’s relative strength remaining consistent.

Investors will also be keen to learn about Microsoft’s future spending plans on AI technology. In Q3, the company reported capital expenditures of $14 billion, primarily directed towards AI infrastructure development. During Alphabet’s earnings call, CFO Ruth Porat revealed that Alphabet spent $13 billion on capital expenditures in Q3, up from $12 billion in the previous quarter, with most of this spending focused on AI.

Microsoft’s shares have risen 13% year to date, reflecting positive market sentiment. In comparison, Google and Amazon’s shares have seen even higher gains, up 22% and 23%, respectively.

As Microsoft reports its Q4 earnings, it will focus on how its substantial investments in AI translate into revenue growth and market share gains. Analysts and investors will look for detailed insights into the company’s AI strategy and future spending plans.

The upcoming earnings report will provide a critical snapshot of Microsoft’s financial health and strategic direction, particularly in the rapidly evolving AI landscape. With robust growth in cloud services and increasing contributions from AI, Microsoft appears well-positioned to capitalize on the AI boom, setting the stage for continued success in the coming years.

Microsoft’s Q4 earnings report will be a crucial indicator of the company’s success in leveraging AI technology for sustained growth. Investors will be closely watching for signs of how these investments are paying off and what the future holds for one of the tech industry’s most prominent players.