Microsoft’s Earnings Report: Cloud Spending, AI Ambitions, and a Whole Lot of Uncertainty
Microsoft’s quarterly earnings report dropped today, and let me tell you, it’s been a wild ride. On the surface, the numbers look pretty sweet: a 17% year-over-year revenue growth and a whopping $81.3 billion in revenue. But, as we dug deeper, concerns about Microsoft’s cloud spending habits started to surface.
Specifically, investors are getting nervous about the company’s cloud infrastructure spending, which clocks in at nearly $1 billion per quarter. That’s a staggering amount, and some are questioning what’s behind it. According to Microsoft, it’s all about fueling their AI ambitions – and specifically serving up AI services to enterprises and AI labs like OpenAI and Anthropic.
However, there’s a catch. Investors are worried that all this spending might not pay off in the long run. Microsoft’s main cloud product, Azure, and its Microsoft 365 apps didn’t quite meet expectations. UBS analyst Karl Keirstead put it bluntly: “The fact that both Azure and the M365 segments fell a bit short is the key negative we’re hearing.”
I have to wonder: is this massive spend really necessary? We’ve been hearing promises of AI’s potential for years now, but last year, people didn’t exactly get excited about Microsoft’s AI products. And let’s be real, it’s not like AI is new to the scene – we’ve all been hearing about its potential for years.
During the earnings call, CEO Satya Nadella tried to soothe some of those concerns. He claims people are actively using Microsoft’s Copilot AI products, citing “practically 3x year-over-year” growth in daily users. We’ve reached out to Microsoft for more info, but as of now, we haven’t heard back.
What we do know is that GitHub Copilot has 4.7 million paid subscribers, a 75% year-over-year jump. Microsoft 365 Copilot has 15 million paid seats, out of a base of 450 million paid seats. Satya and CFO Amy Hood seem convinced that demand for AI services far outstrips data center supply, so the new gear is basically booked to capacity for its lifespan. But will it be worth it? Only time will tell.
It’s clear that Satya Nadella is convinced people are using Microsoft’s Copilot AI products, and that’s all that matters… right?
