There’s little debate on Wall Street that Microsoft will be a long-term winner from the move toward artificial intelligence. But as for when generative AI could materially boost the company’s financial performance? That remains a matter of considerable debate.
But investors have belatedly come to realize that the creation of AI software tools also involves considerable upfront investment in computing resources, putting pressure on margins. Microsoft’s guidance implied 25% to 26% Azure growth for the September quarter, compared with 26% in the June quarter. Microsoft has said it expects AI related work to give Azure a two percentage point boost in the September quarter, up from a one point lift in the June quarter.
“We don’t expect this quarter’s results to provide a strong indication of Microsoft’s development in GenAI in either direction, which is the narrative that we believe will drive the stock’s progression over the medium term,” he writes in a note previewing the quarter. For Microsoft’s September quarter, Wall Street’s consensus as measured by FactSet calls for revenue of $54.5 billion, up 8.8%, with profit of $2.65 a share, up from $2.35 a year earlier.
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