(San Francisco) Often considered the leader in the race for generative artificial intelligence (AI), Microsoft now sees its financial results evaluated in terms of the revenues linked to this cutting-edge technology, compared to the astronomical investments it requires.
The IT giant disappointed on Tuesday, due to less good performances than expected for its cloud (remote computing) and AI services activities.
Azure, its cloud platform that hosts new generative AI tools, saw sales increase 29%, instead of the 31% the market expected for the April-June period.
The punishment was immediate on Wall Street: its shares lost up to 7% in electronic trading after the stock market closed.
The Redmond group is playing on all the AI tables: it has injected billions of dollars into OpenAI, the start-up that developed ChatGPT, it is the number two in the global cloud (behind Amazon, ahead of Google) and is developing its own services and devices adapted to this new technology.
“We have over 60,000 customers for Azure AI today, up 60% from a year ago, and the average spend per customer continues to grow,” Microsoft CEO Satya Nadella said at the analyst conference.
Enough to reassure the market: the group’s shares only lost 3% in the aftermath.
“Barometer”
In total, the Windows group achieved 64.7 billion dollars in turnover in the fourth quarter of its staggered financial year, up 15% year-on-year, of which it generated 22 billion (+10%).
“Microsoft and Nvidia are the two best technology barometers of the pace of adoption of the AI revolution globally,” says Wedbush’s Dan Ives.
With its ultra-sophisticated chips, Nvidia is the other group that is benefiting greatly from the craze for generative AI and its models (like ChatGPT), capable of producing high-quality content, on a simple request in everyday language.
The analyst is not worried about Wall Street’s “knee-jerk” reactions and draws the following lessons from the conference: “AI will indeed generate revenue and investments in AI constitute a new IT infrastructure for the next 15 years.”
He expects Microsoft to generate $25 billion in additional AI-related revenue by fiscal year 2025.
But for now, Silicon Valley’s star technology represents above all massive spending on data centers, energy, electronic components and human resources.
Microsoft has announced more than $15 billion in overseas AI investments this year, from France to Indonesia.
“PC to AI”
Microsoft CFO Amy Hood again acknowledged Tuesday that spending would continue to rise, but said the new infrastructure was “incredibly flexible” and would generate revenue “for 15 years and beyond.”
She also said the group continued to face higher demand than its current capacity.
Microsoft’s personal computer business, for its part, reported nearly $16 billion in quarterly revenue, up 14% year-on-year, driven in particular by sales of the Windows operating system and the Xbox.
Its device sales, however, fell by 11%, after an already difficult 2023.
The group is counting on its “AI PCs” to get back on track. Presented in May, these are computers in which generative AI tools are integrated directly into the Windows operating system, to assist the user in their tasks.
Worldwide shipments of PCs and smartphones with generative AI are expected to reach nearly 300 million units by the end of the year, up from 29 million in 2023, according to research firm Gartner.
But Microsoft’s reputation has been tarnished in recent months by cybersecurity incidents and the global outage in mid-July, when a CrowdStrike software update on Windows crippled airports, hospitals and many other organizations.
“This could affect its various government and defense contracts, and slow adoption by cautious enterprise customers,” said Emarketer analyst Gadjo Sevilla.