Microsoft earnings to highlight AI, cloud services direction
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Microsoft (NASDAQ:MSFT) is on tap to deliver its fiscal third-quarter results after the close of trading on Tuesday, and much of Wall Street is going to zero in on what the software giant has to say about its Azure cloud business and massive push into the artificial intelligence arena.
Analysts currently estimate that Microsoft (MSFT) will report a profit of $2.23 a share on $51B in revenue for its fiscal third quarter. During the year ago period, Microsoft (MSFT) earned $2.22 a share, on $49.4B in sales.
Goldman Sachs analyst Kash Rangan said that Wall Street has been concerned about a potential slowdown in the growth rate of Microsoft's (MSFT) Azure services. However, Rangan added that, "We see signs that this growth can potentially stabilize" starting in the company's fiscal fourth quarter, due to improvements in workload growth and a need for customers to "utilize" unused cloud credits. Such momentum could create what Rangan called a "tailwind" as customers have pushed out their spending plans into the second half of this year.
AI will also be in the spotlight as Microsoft (MSFT) has gone all-in on the technology via its multibillion-dollar investment in ChatGPT developer OpenAI, and adding such AI capabilities to its Edge browser and Bing search engine.
On Monday, Wedbush analyst Dan Ives said that due to its investment in ChatGPT, Microsoft (MSFT) may have as much as a two-year lead over Google (GOOG) and other comparable players in the AI market.
Not all Microsoft (MSFT) watchers are sold on the company as an investment. Seeking Alpha contributor Dair Sansyzbayev said it's hard to throw shade at Microsoft's (MSFT) "strong financials" that include "impressive revenue growth, [and] increasing profit margins." However, Sansyzbayev said he was concerned that "current headwinds" in the larger economic environment might result in Microsoft (MSFT) missing analysts' earnings forecasts.
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Microsoft, Google and a 'moment of truth' for tech's upcoming earnings
Microsoft seen leading AI arms race by as much as two years
Microsoft Azure may have lead in generative AI, but AWS not far behind