(Automated translation by Reuters, please see disclaimer
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Microsoft forecasts Azure revenue growth in the second quarter of 31% to 32%
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Capital spending rose 5.3% to $20 billion
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The quarterly results are the first since the company restructured its activity reports
(Quarterly results are first since company restructured its reporting) By Deborah Mary Sophia, Aditya Soni and Anna Tong
Microsoft MSFT.O planned to increase its spending on artificial intelligence this quarter but slow growth in its Azure cloud business, signaling that big investments in AI were not enough to keep pace with capacity constraints of its data centers.
Shares of the Redmond, Washington-based company fell 3.6% in after-market trading, giving up earlier gains. The company beat Wall Street estimates for first-quarter revenue and profit.
Facebook owner Meta META.O, which also reported results that beat analysts’ expectations, warned of a “significant acceleration” in AI infrastructure spending, sending shares tumbling. its action by 3.1% in after-market trading.
Brett Iversen, Microsoft’s vice president of investor relations, reiterated that Microsoft would not be able to meet AI-related capacity constraints until the second half of its fiscal year.
Microsoft expects Azure revenue growth of 31% to 32% in the second quarter, which is lower than the 32.25% growth expected by analysts on average, according to Visible Alpha. Azure’s revenue grew 33% in the fiscal first quarter that ended Sept. 30, slightly ahead of estimates.
AI contributed 12 percentage points to Azure’s growth in the first quarter, compared to 11 percentage points in the previous quarter.
Microsoft has spent billions building its AI infrastructure and expanding its data centers. For the quarter, Microsoft said capital spending increased 5.3% to $20 billion, up from $19 billion in the previous quarter. This figure is higher than the estimates of Visible Alpha, which expected $19.23 billion.
These considerable expenses have caused concern among some investors.
The company was the worst performer among big tech names this year, gaining just over 15%, while Meta jumped 68% and Amazon.com AMZN.O climbed 28%. .
According to estimates by analysts at Visible Alpha, Microsoft will spend more than $80 billion in the fiscal year that began in July. This represents an increase of more than $30 billion from the previous fiscal year.
“Microsoft is escalating a capital spending war that it may not be able to win. This level of investment is very high, it has created a very significant drag on free cash flow and will create a very significant drag on margins at the future,” said Gil Luria, head of technology research at DA Davidson.
Google, Microsoft’s rival, has benefited from the growth of AI. On Tuesday, Alphabet GOOGL.O said AI contributed to a 35% increase in its cloud business. Its shares closed up more than 2.8% on Wednesday and were down 0.4% after the market close.
PARTENARIAT OPENAI
The quarterly results are Microsoft’s first since it restructured how it reports its business to more closely align with how it is managed. This restructuring, however, made it more difficult to estimate performance for the quarter.
Earnings per share came in at $3.30, compared with analysts’ average estimate of $3.10, according to LSEG data.
Revenue rose 16% to $65.6 billion in the fiscal first quarter that ended in September, compared with analysts’ average estimate of $64.5 billion, according to LSEG.
The company is considered the Big Tech leader in the AI race thanks to its exclusive partnership with ChatGPT maker OpenAI. Microsoft’s Azure customers have access to the latest OpenAI models, such as o1 models, capable of solving complex math, science, and coding problems.
In addition, Microsoft has early access to infuse OpenAI technology into its product portfolio, such as Bing and its enterprise applications such as Excel and PowerPoint, but this effort has not yielded the results. expected results.
Outside of its cloud business, Microsoft reported revenue of $28.3 billion for its productivity business, which includes the Office suite of applications, 365 Copilot and its AI and analytics services. voice technology.
Microsoft’s personal computing unit, which houses the Windows operating system as well as devices such as Surface and gaming products such as Xbox hardware, content and services, saw a 17% increase in its turnover, which amounts to 13.2 billion dollars.
