'AI momentum building in Redmond': Wall Street reacts to Microsoft earnings

fiscal fourth-quarter earnings report failed to jolt its stock price higher as investors come to terms with the gradual ramp-up of its new artificial intelligence offerings.

Shares of Microsoft fell about 3% on Wednesday despite it beating both revenues and profit estimates. The company saw revenue grow 8.3% year-over-year to $56.2 billion in the quarter, while its GAAP earnings per share of $2.69 beat analyst estimates by $0.14. All eyes are on Microsoft's cloud growth, as well as its rollout of AI technologies via Microsoft CoPilot, which will cost its Microsoft 365 users an additional $30 per month. While the rollout of Microsoft CoPilot could drive significant revenue growth for the company going forward, it will take some time for that opportunity to be fully realized. Wedbush:"AI Momentum building in Redmond.

"The stock sold off modestly as Nadella and Co. commented that the AI ramp will be 'gradual' in FY24 which is not a surprise to the Street as FY25 remains the true inflection year of AI growth with pricing, beta customers, and use cases all being rolled out over the next three to six months," Wedbush analyst Dan Ives said.

"Though Azure growth was below our upside case, we view the high end of the guidance as solid in an environment where optimization headwinds do not appear to be abating. While AI did not provide material upside to Q4 Azure growth , guidance for a 2% tailwind in Q1 suggests workloads are ramping. Commentary for a more meaningful AI tailwind to H2 growth suggests that the AI-enabled M365 Copilot offering is likely to begin contributing in that time frame.

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