Microsoft’s earnings report Tuesday afternoon, July 30, will provide new insights into the impact of artificial intelligence on its business, and the company’s attempt to keep pace with anticipated AI demand.
The report will cover the three months ended June 30, 2024, the fourth quarter of the company’s 2024 fiscal year. Some of the key benchmarks to watch:
- Wall Street analysts, on average, expect $64.36 billion in revenue, up 14.5% from a year ago, toward the high end of the company’s guidance.
- Analysts expect earnings of $2.70 per share, up slightly from $2.69 a year ago.
- Microsoft said previously that it expected 30% to 31% growth in its Azure cloud business for the quarter.
In addition, analysts will be keeping an eye on Microsoft’s capital expenditures, which reached a record $14 billion in its March quarter this year, with no sign of slowing down as the company builds out and upgrades its cloud data centers to train and run AI models at massive scale.
Here’s what the capital expenditure trend looks like over the past few years.
AI’s contribution to the growth of Microsoft’s cloud business will also be closely watched. In the most recent quarter, Microsoft said AI accounted for 7 points of the 31% growth in Azure and other cloud services.
In the meantime, look for Microsoft to maintain a tight lid on operating expenses, with little to no headcount growth, as the company tries to keep its profit margins up despite the increased spending on cloud and AI infrastructure.
Here’s the headcount trend, reflecting the impact of job cuts starting in Q4-23, followed by an influx of employees from the company’s record $68.7 billion acquisition of video-game giant Activision-Blizzard.
Microsoft has continued to make job cuts in recent months across the company.
Amy Hood, chief financial officer, told analysts during Microsoft’s most recent conference call that the company expected operating margins to increase more than 2 points overall for the 2024 fiscal year.
“This operating margin expansion reflects the hard work across every team to drive efficiencies and maintain disciplined cost management knowing we will continue to grow our cloud and AI investments next year,” Hood said.
In the Windows business, Microsoft and PC makers launched the first AI-powered Copilot+ PCs in June, initially without the flagship Recall feature due to privacy concerns. That was toward the end of the quarter, minimizing any impact on PC sales in the context of the company’s earnings report this week.
- Microsoft gave Q4 guidance of 10% to 13% revenue growth in its More Personal Computing division, to a range of $15.2 billion to $15.6 billion, with Windows OEM growth (copies of Windows preinstalled on PCs) in the “low- to mid-single digits.”
In other parts of the company’s business …
- Microsoft’s guidance is 9% to 11% revenue growth for the June quarter in Productivity and Business Processes, which includes Office and related products, to a range of $19.9 billion and $20.2 billion in revenue.
- In line with recent trends, the biggest revenue growth for the quarter is expected in the Intelligent Cloud division, up 19% to 20%, to a range of $28.4 billion to $28.7 billion, based on the company’s guidance.
We’ll also be listening for any commentary from Microsoft CEO Satya Nadella on the high-profile CrowdStrike outage that impacted Windows PCs used by airlines, hospitals and other large organizations.
Check back Tuesday afternoon for coverage on GeekWire.
https://ift.tt/DqpP7KU July 29, 2024 at 02:08PM GeekWire
Post a Comment
0Comments