Microsoft to report fiscal Q4 earnings as Wall Street eyes AI revenue and spending
Microsoft (MSFT) will report its fiscal fourth quarter earnings after the bell on Tuesday as Wall Street continues to look for signs that the massive wave of AI investments among Big Tech firms is starting to pay off.
For the quarter, Microsoft is expected to report earnings per share of $2.94 on revenue of $64.5 billion, according to data compiled by Bloomberg. Microsoft reported EPS of $2.69 on revenue of $56.2 billion during the same period last year.
Cloud revenue is expected to come in at $36.8 billion with Intelligent Cloud revenue, which includes Azure, set to hit $28.7 billion.
During its prior quarter, Microsoft announced that AI services contributed 7 percentage points of growth to its Azure and other cloud services revenue. That was up from 6 percentage points in Q2 and 3 percentage points in Q1. The company initially began reporting AI contributions in Q4 of last year, saying AI added 1 percentage point of growth to Azure at the time.
Shares of Microsoft are up 13% year to date.
Microsoft’s report follows rival and Google parent Alphabet’s (GOOG, GOOGL) earnings announcement last week, during which the company said it is seeing an uptick in cloud revenue partially due to interest in AI products.
Still, Google didn’t offer specific numbers on the impact of AI on the cloud business, leaving some analysts like UBS Global Research’s Stephen Ju to predict that revenue benefits from the company’s AI spending might not come until the first half of 2025 at the earliest.
“Our checks for Microsoft have been robust this quarter again, as we believe the AI tidal wave with Redmond in the driver’s seat is accelerating cloud deal flow for Azure with strong momentum into the rest of 2024/2025,” Wedbush analyst Dan Ives wrote in an investor note ahead of Microsoft’s announcement.
According to UBS Global Research analyst Karl Keirstead, Microsoft has also been grabbing more market share from Google and Amazon.
“In terms of share shifts among AWS, Microsoft Azure, and Google Cloud, the most consistent theme in this round of checks was the number of customers and partners that cited share gains by Microsoft resulting from its early lead on the AI front,” Keirstead wrote in a recent note about the three major cloud players.
“This has been a recurring theme from checks over the last 6-12 months and the commentary about Azure’s relative strength felt consistent with prior checks,” he added.
Outside of how much Microsoft is making on AI, investors will want to know how much more the company plans to spend on the technology moving forward. In Q3, 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 prior quarter, adding that the vast majority of that spending is going toward AI.
Amazon (AMZN) is set to report earnings on Aug. 1.
Shares of Google are up 22% year to date, while shares of Amazon are up 23%.
Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.
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