Microsoft (NASDAQ:MSFTMicrosoft is scheduled to report fourth-quarter results on Tuesday, and investors will be focusing on Azure growth and earnings, given the Redmond-based tech giant’s capital investment in artificial intelligence.
Wall Street expects the company to post earnings per share of $2.94. On revenues of $64.44 billion, representing an increase of 14.7%.
Microsoft, which is considered a leader in GenAI adoption after its partnership with OpenAI, is expected to see strong growth in the cloud space, according to most analysts.
“We believe the AI wave with Redmond in the driver’s seat is accelerating Azure cloud deal flow with strong momentum through the rest of 2024/25,” said Wedbush analyst Dan Ives, adding that he expects the company to post “strong results for the June quarter.”
The most important metric will be Azure growth, with a market forecast of 30% growth, which the brokerage believes is beatable, given the high level of deal activity during the quarter from MSFT’s core enterprise clients, Ives said.
Similarly, Morgan Stanley said it was seeing “strong demand” in its fiscal fourth-quarter results, due in part to “modest” acceleration in its Azure cloud service.
The Satya Nadella-led company has invested billions of dollars in OpenAI, giving it the upper hand when it comes to adopting artificial intelligence. Microsoft said it expects to increase capital spending materially in the fourth quarter on a sequential basis, driven by investments in cloud computing and artificial intelligence infrastructure.
The company expects capital expenditures in fiscal year 2025 to be higher than those in fiscal year 2024.
While some analysts said Microsoft’s massive investment in AI may already be a done deal, others noted that high capital spending could put pressure on its free cash flow growth in the coming years.
“I expect CEO Nadella to once again discuss the large capital expenditures for cloud computing and AI development. This could turn off a significant portion of investors due to the impending uncertainty and increased competition in the market,” a recent analysis by Seeking Alpha noted.
Over the past year, Microsoft has beaten earnings per share estimates by 100%, and beat revenue estimates by 75%.
Seeking Alpha Wall Street analysts are bullish and rate the stock as Buy and Above, while Seeking Alpha Quant Ratings rates it as a Hold, with a Low Valuation factor in the score.
Over the past three months, earnings per share estimates have been revised upward seven times, compared to three downward revisions. Revenue estimates have seen six upward revisions, compared to eight downward revisions.
The stock has gained 14% so far this year.
