Microsoft Bets Big on Azure Despite its Decline in Revenue Growth
Recently Microsoft announced its financial results for the fourth quarter of FY23 where it witnessed a slump of 1% for Azure revenue growth from previous quarter, while remaining optimistic about its future investments in Azure cloud. Microsoft shares fell 4% on Tuesday after hours trading Tuesday night as the tech giant reported Azure and other cloud services revenue growth of 26% year-over-year for the fourth quarter, down 1 percentage point from the quarter prior and 40% from the year-ago quarter. Microsoft’s revenue beat Wall Street expectations of $55.47 billion as expected by Refinitiv. The company reported a revenue of $56.2 billion up by 8% as compared to the corresponding quarter last year. Meanwhile, net income for the quarter rose 20% to $20.1 billion, or $2.69 per share. Analysts were expecting $2.55 a share. The revenue from Office commercial products and cloud services witnessed a 12 percent year-over-year increase, driven by a notable 15 percent growth in Office 365 Commercial revenue. Linkedin, which is Microsoft’s one of the most used professional apps, saw a major decline in  revenue growth. Linkedin’s revenue growth was only 5% as compared to 26% in the corresponding quarter last year. The earnings report for this quarter is crucial as it comes on the backdrop of announcements made by Microsoft on generative AI and its cloud services for enterprises. “Organizations are asking not only how – but how fast – they can apply this next generation of AI to address the biggest opportunities and challenges they face – safely and responsibly,” said Satya Nadella, the chairman and chief executive officer of Microsoft, in a release announcing the earnings. “We remain focused on leading the new AI platform shift, helping customers use the Microsoft Cloud to get the most value out of their digital spend and driving operating leverage,”  he added. Microsoft  usually does not break out precise quarterly revenue for Azure, its most crucial tool to leverage generative AI endeavors. However, in the earnings call, Microsoft CEO Satya Nadella revealed that Microsoft Cloud surpassed $110 billion in annual revenue, up 27% in constant currency, with Azure all-up accounting for more than 50% of the total for the first time. What’s next? Speaking on its future roadmap for the next quarter, CFO Amy Hood said the company will accelerate investment in our cloud infrastructure. Microsoft expects capital expenditures to increase sequentially each quarter through the year as it scales to meet demand signals. Microsoft expects Azure revenue growth to be 25 to 26% for next quarter (Q1) in constant currency, including roughly 2 points from all Azure AI services. “Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and from in-period revenue recognition depending on the mix of contracts” CFO Amy Hood added. Microsoft has also recently diversified its AI endeavors across the industry. Notably, the company forged a partnership with Meta, leading to the release of Llama 2 on Azure, the social network’s open-source large language model. This collaboration offers Llama 2 for free, enabling commercial or developer use of the model.
Microsoft expects Azure revenue growth to be 25 to 26% for next quarter (Q1) in constant currency
Recently Microsoft announced its financial results for the fourth quarter of FY23 where it witnessed a slump of 1% for Azure revenue growth from previous quarter.
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["Go", "API", "AI", "Azure", "RPA", "Git", "RAG", "generative AI", "GAN", "R"]
["AI", "generative AI", "RAG", "Azure", "R", "Go", "Git", "API", "GAN", "RPA"]
Siddharth is a media graduate who loves to explore tech through journalism and putting forward ideas worth pondering about in the era of artificial intelligence.