As Microsoft (MSFT) prepares to disclose its second-quarter earnings, the tech giant’s robust investments in artificial intelligence (AI) are under scrutiny, with the stock having surged by 50% over the past year, propelling the company’s market capitalization beyond $3 trillion. Microsoft’s foray into AI has been a major contributor to its success, surpassing even longtime rival Apple (AAPL) in market cap.
Analysts are keenly observing the results, expecting Microsoft to report adjusted earnings per share of $2.78 on revenue totaling $61.1 billion for the quarter. This represents a notable increase from the same period last year when the company posted an EPS of $2.32 on revenue of $52.7 billion.
The Intelligent Cloud segment, encompassing Microsoft’s Azure service, is anticipated to contribute $25.3 billion in the quarter, compared to $21.5 billion in Q2 of the previous year. Overall Microsoft Cloud revenue is projected to exceed $32.2 billion, up from $27.1 billion last year.
In the realm of productivity, Microsoft’s Productivity and Business Processes revenue is expected to reach $19 billion, surpassing the $17 billion reported in Q2 of the preceding year. The More Personal Computing business, inclusive of Windows software and the Xbox gaming division, is forecasted to generate $16.8 billion, an increase from $14.2 billion in the previous year.
Microsoft’s expansive AI initiatives permeate various facets of its business, with the company striving to capitalize on this investment. Monetization avenues include generative AI cloud services, the Copilot for Microsoft 365 productivity platform, and the Copilot Pro for consumers.
While Microsoft remains a leader in AI, competitors like Google and Amazon are intensifying their AI investments. Despite recent controversies surrounding generative AI technology, including the inappropriate use of AI-generated explicit images, the industry continues to forge ahead. Microsoft, alongside Google and Amazon, is at the forefront of the AI race, with billions invested to secure leadership in AI software.
Microsoft’s earlier investment in ChatGPT developer OpenAI positioned it as an early frontrunner, but Google’s Gemini AI model and Amazon’s $4 billion investment in AI company Anthropic indicate the growing competition.
The controversy surrounding generative AI is unlikely to derail the momentum of AI advancements. As companies consistently announce new AI-related products and PC and smartphone vendors unveil devices capable of native generative AI software, 2024 is expected to witness continued growth in the AI sector.
Now, Microsoft and its counterparts must demonstrate that the hype and investments made in AI are indeed worthwhile, as they navigate the evolving landscape of this transformative technology.
