Microsoft cloud growth accelerates on back of AI push

Earnings

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Microsoft CEO Satya Nadella arrives at federal court in Washington on Oct. 2, 2023.
Nathan Howard | Bloomberg | Getty Images

Microsoft will report financial results for its fiscal third quarter after the market close on Thursday.

Here is what analysts are looking for, according to LSEG:

  • Earnings per share: $2.82 expected
  • Revenue: $60.80 billion expected

This would imply 15.0% year-over-year revenue growth, slightly higher than the 14.5% forecast that management gave in January. Analysts bumped their projections after technology industry researcher Gartner estimated that PC shipments increased 0.9% in the quarter. The data point factors in sales of Windows operating system licenses to PC makers.

Analysts polled by CNBC expect growth from Azure cloud services to slow to 28.8% from 30% in the previous quarter. The StreetAccount consensus for Azure growth is 28.6%.

During the quarter, Microsoft introduced Surface PCs with a key for quickly accessing the Copilot chatbot. The company started selling access to the Copilot for small businesses with Microsoft 365 productivity software subscriptions and hired Mustafa Suleyman, co-founder of artificial intelligence lab DeepMind, to run a new Microsoft AI group. Suleyman had been co-founder and CEO of startup Inflection, and many of its employees also joined Microsoft.

“We have been operating with speed and intensity and this infusion of new talent will enable us to accelerate our pace yet again,” CEO Satya Nadella wrote in a memo about the Inflection deal, which was reportedly worth $650 million.

This marks the first full quarter for sales of the Copilot add-on for commercial Microsoft 365 customers. In a note on Sunday, analysts at Piper Sandler warned clients not to expect many financial details from Microsoft.

So far this year, Microsoft stock is up 4%, while the S&P 500 index has gained about 5%.

Executives will go over the results and issue guidance on a conference call with analysts starting at 5:30 p.m. ET.

This story is developing. Please check back for updates.

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