The upcoming Microsoft earnings report is set to provide insights into the impact of artificial intelligence on the company’s business and its efforts to keep pace with the growing AI demand. Analysts are expecting a 14.5% increase in revenue to $64.36 billion, along with earnings of $2.70 per share. Microsoft previously stated an expected 30% to 31% growth in its Azure cloud business for the quarter, as well as continued capital expenditures to build and upgrade cloud data centers for AI infrastructure.
The contribution of AI to the growth of Microsoft’s cloud business will be closely monitored, with recent reports indicating that AI accounted for 7 points of the 31% growth in Azure and other cloud services. Despite increased spending on cloud and AI infrastructure, Microsoft is expected to maintain tight control over operating expenses with little to no headcount growth. This reflects the impact of job cuts and the influx of employees from the acquisition of Activision-Blizzard.
Job cuts have continued at Microsoft in recent months, with the aim of increasing operating margins by more than 2 points for the 2024 fiscal year. The company’s CFO, Amy Hood, emphasized the importance of driving efficiencies and disciplined cost management to balance growth in cloud and AI investments. Microsoft’s Windows business also saw the launch of AI-powered Copilot+ PCs, but the Recall feature was initially omitted due to privacy concerns, potentially impacting PC sales at the end of the quarter.
In terms of guidance, Microsoft expects 10% to 13% revenue growth in its More Personal Computing division for the fourth quarter, with Windows OEM growth expected in the low- to mid-single digits. Revenue growth projections in other parts of the business include 9% to 11% in Productivity and Business Processes, and a growth of 19% to 20% in the Intelligent Cloud division. Investors will be looking for updates on the high-profile CrowdStrike outage impacting Windows PCs used by large organizations, as well as commentary from CEO Satya Nadella during the earnings report.
Overall, the upcoming Microsoft earnings report will shed light on the company’s performance in the fourth quarter of its 2024 fiscal year, particularly in relation to AI investment and cloud infrastructure. Analysts will be closely watching revenue and earnings figures, as well as trends in operating expenses and headcount. Updates on recent developments in Microsoft’s various business divisions, such as the Windows and Intelligent Cloud divisions, will also be of interest to stakeholders. Stay tuned for coverage of the earnings report on Tuesday afternoon for more insights into Microsoft’s financial performance.
