Azure – Fountainheadinvesting

Microsoft (MSFT) shares fell nearly 7% in extended hours trading on Tuesday after the tech giant reported fiscal fourth-quarter results that topped expectations, but Azure growth was weaker-than-expected or simply the expectations were too high.

For the period ending June 30, Microsoft earned $2.95 per share – above $2.93 guidance as revenue rose 15% year-over-year to come in at $64.7B – above 64.52 guidance

Included in that was $28.52B from its Intelligent Cloud division, which consists of its Azure cloud unit. Microsoft said Azure revenue grew 29% year-over-year and 30% in constant currency.

The company previously said it expected Azure to grow between 30% and 31% in constant currency, and some analysts previously said they expected more than 30% growth.

Guidance for the Sep quarter will come in with the call.

Microsoft (NASDAQ:MSFT) is scheduled to report its second-quarter results on Tuesday, January 30th, after market close, kicking off tech earnings.
Analysts expect a year-over-year increase in both the top and bottom lines, with earnings per share of $2.77 on revenues of $61.13 billion.

The Redmond, Washington-based company recently became the second tech giant, after Apple (AAPL), to cross the $3 trillion mark, buoyed by its artificial intelligence products. Its shares have surged nearly 63% in the last 12-months.

Microsoft (MSFT) has poured billions of dollars into OpenAI, making it the startup’s largest investor. This has let it get ahead of rivals Alphabet (GOOG)(GOOGL), Amazon.com (AMZN), and Meta Platforms (META) in the AI race.

The technology underlying OpenAI’s ChatGPT has become entwined in Microsoft (MSFT) products.

The Windows maker recently expanded access to its generative AI offering Copilot. The subscription plan is now offered to individuals and small businesses.

Copilot, which Microsoft (MSFT) dubs as an “everyday AI companion,” is intended to assist writers, programmers, creators, and designers.

According to investment firm Citi, a 5% adoption rate by its 77M customers using Microsoft 365 could add $925 million in revenue by fiscal year 2025. An adoption rate of 15% could add $2.7 billion in sales.

Analysts at Wedbush believe Microsoft (MSFT) will be the most important earnings report and conference call in all of earnings season.

The company is expected to handily beat expectations for the December quarter. Investors will be focusing on the Azure growth metric and the performance of its cloud business.

While AI be a dominant theme in 2024, analysts are of the opinion that 2025 will be the true inflection year.

Last week, Microsoft (MSFT) announced it was laying off 1,900 employees at its gaming division, primarily impacting employees at Activision Blizzard and Xbox.

Over the last three months, the company’s estimates have seen substantial upgrades. Its earnings per share estimates have been revised upwards seven times vs. one downward move, while revenue estimates have seen seven upward moves, compared to two downward revisions.

Seeking Alpha analysts at large consider MSFT a Buy. This compares with average Wall Street rating of Strong Buy and SA Quant rating of Hold.