Microsoft (MSFT) is scheduled to report second-quarter results after the bell on Tuesday, but Wall Street will be looking for signs that the company’s massive artificial intelligence (AI) investments continue to pay off. Microsoft has been one of the biggest beneficiaries of AI trading, with stock prices soaring 50% over the past 12 months, pushing Microsoft’s market capitalization past $3 trillion.
As of Monday afternoon, Microsoft was the world’s richest company by market capitalization, surpassing longtime rival Apple (AAPL), which has suffered a recent share price cut over concerns about weak iPhone sales in China.
Wall Street expects Microsoft to post adjusted earnings of $2.78 per share and revenue of $61.1 billion this quarter, according to analyst estimates compiled by Bloomberg. This is an increase from the same period last year, when the company posted EPS of $2.32 on revenue of $52.7 billion.
Microsoft’s intelligent cloud division, which includes Azure services, is expected to bring in $25.3 billion in revenue in the quarter, up from $21.5 billion in the second quarter last year. Overall Microsoft Cloud revenue is estimated to be more than $32.2 billion, compared to $27.1 billion last year.
On the productivity front, analysts estimate Microsoft’s productivity and business process revenue will reach up to $19 billion, up from $17 billion in the second quarter of last year.
Revenue from the company’s More Personal Computing business, which includes sales from its Windows software and Xbox gaming divisions, is expected to be $16.8 billion, up from $14.2 billion a year ago.
Microsoft’s AI efforts permeate nearly every part of its business, and the company is focused on ensuring that results are achieved. So far, the company has monetized its AI efforts through its generative AI cloud service, Copilot for Microsoft 365 productivity platform, and Copilot Pro for consumers.
Earlier this month, the company opened Copilot for Microsoft 365 to all businesses, removing the previous requirement that customers need at least 300 employees to sign up for the paid service. Customers pay $30 per user per month for access to the software. His Copilot Pro for consumers, on the other hand, costs $20 per user per month and is aimed at consumers who want to take advantage of Copilot’s more advanced features.
Microsoft, as well as rivals Google (GOOG, GOOGL) and Amazon (AMZN), have invested billions of dollars in AI over the last year, aiming to gain an edge in the race to become the AI software leader. I’ve been pouring it in. .
Microsoft grabbed an early lead thanks to its investment in ChatGPT developer OpenAI, but Google and Amazon are gaining momentum. Google released its powerful Gemini AI model in December, and in September Amazon announced a $4 billion investment in AI company Anthropic, giving the cloud giant minority shareholder status in the company.
However, the generative AI technology has recently come under fire after an X user posted an explicit AI-generated image of Taylor Swift. The move has led to further calls for legislation targeting so-called deepfake images and videos.
Still, this controversy is unlikely to slow down the development of AI. Generative AI will be a big player throughout 2024, as companies are releasing product announcements related to this technology at a steady pace, and PC and smartphone vendors are debuting their own products that can run generative AI software natively. It’s clear that it’s powerful.
Now, Microsoft and its ilk must continue to prove that the hype and cash spent is worth it.
daniel howley I’m the technology editor at Yahoo Finance. He has been covering the technology industry since his 2011. You can follow him on Twitter. @Daniel Howley.
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