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Home Banking Microsoft: cloud growth delivers the goods

Microsoft: cloud growth delivers the goods

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  • Revenue up 16% to $65.6bn vs $64.5bn expected
  • EPS $3.30 vs $3.09 expected

Matt Britzman, senior equity analyst, Hargreaves Lansdown:

“Microsoft’s not been the hottest stock of late, so expectations heading into earnings were perhaps a little lower than some of its mega-cap peers. The key number here was around Azure growth, and at 33% it hasn’t disappointed. There’s a little nuance here because reporting has changed from what we’re used to seeing, but on first look these numbers are strong. One of the key elements is how much growth is from AI, and at 12%, that’s higher than expected and continues to support the argument that the major cloud providers are well-placed to benefit from the new AI demand cycle.

But there’s still scope for improvement, the partnership with OpenAI is acting as a drag on performance as Microsoft rents out valuable compute to the ChatGPT maker at discounted prices. It would be a bold move, but there’s an opportunity at hand to shift some of that compute capacity to more profitable business. Nevertheless, Microsoft has placed itself at the top of the food chain, and with AI integration opportunities across the stack from infrastructure to software, it’s likely to stay there for some time.”

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