Microsoft investors are growing worried about the slow returns from the company’s big investments in artificial intelligence, even though its cloud service, Azure, is showing steady growth.
Before Microsoft’s earnings announcement expected on July 30, data shows that Azure’s revenue has been growing steadily by 31% each quarter. AI has helped this growth, adding seven percentage points to Azure’s 2024 performance.
Despite this progress, investors are concerned whether Microsoft’s spending on AI tools and data centers is justified. Analysts have noted that Microsoft’s capital spending, including its investments in AI, has jumped by about 53% from last year, reaching $13.64 billion.
Microsoft’s global revenue has been rising steadily over the years. In 2023, the company made $211.92 billion, up nearly 7% from the previous year. For the period up to March 31, 2024, revenue hit $236.58 billion, marking a nearly 14% increase.
However, there’s concern that high spending on data centers might not bring quick returns, similar to issues faced by other tech giants like Google. Alphabet, Google’s parent company, saw a profit increase of 29% last quarter thanks to its own AI investments, but its stock still faced challenges.
Microsoft’s stock has increased by 13% in 2024, adding over $350 billion to its market value. The company is expected to see a 14.6% revenue increase for the April-June period, although this is a 17% drop from the previous quarter. The decline is attributed to slower growth in its personal computing division, which includes Windows and Xbox.
On July 19, Microsoft experienced a significant global outage due to cybersecurity software issues from CrowdStrike, affecting services like emergency systems, banks, airports, and broadcasters. This incident highlighted ongoing challenges despite the company’s strong performance in other areas.
