Microsoft Earnings Preview: Azure, Copilot AI is the Key
1min read Microsoft is set to release its earnings soon. Once the global leader in market cap for years, Microsoft recently slipped to third, overtaken by Apple and Nvidia. Will this report mark a turning point for reclaiming the top position?
Azure cloud and AI:
The focus is firmly on Azure cloud services, which make up nearly 60% of Microsoft's revenue and are key to its growth trajectory. With Google Cloud's recent strong performance highlighting accelerated AI commercialization, expectations are high for Azure.
OpenAI's ChatGPT, backed heavily by Microsoft, remains AI's only "killer app" to date, giving Azure a potential edge. As the second largest global cloud provider, can Azure, bolstered by OpenAI, challenge AWS's dominance?
The commercialization of Microsoft 365 and its Copilot AI is another crucial area. Recently, GitHub Copilot announced support for models from Anthropic, Google, and OpenAI, which could drive more paid users.
However, it is worth noting that a previous report from Morgan Stanley stated that an IT executive from a pharmaceutical company tried Office 365 Copilot but canceled the subscription six months later, deeming it not worth the cost. The executive mentioned that the AI-generated PowerPoint presentations were only at a middle school level!
Personal PC:
Beyond cloud services, AI could spark a new upgrade cycle for personal PCs, similar to the AI-fueled demand surge seen with Apple's iPhones. Can AI bring the same excitement to PCs?
Capital Expenditure
Microsoft's intense investment in AI also stands out. Reports show it is Nvidia's largest client for the Blackwell GB200 chips, with Q4 orders up 3-4 times, outpacing all other cloud providers combined. With capital expenditures likely to keep rising, the key question is: how soon can these AI investments deliver commercial returns?
