Microsoft Earnings All About AI

On Thursday, after the bell, Microsoft $MSFT will release its fiscal third-quarter profits. Wall Street is still waiting for evidence that the AI surge is real, not just hype. Analysts are expecting more from Microsoft, which reported in the most recent quarter that its AI capabilities increased Azure revenue by 6 percentage points, compared to just 3% the previous quarter.

Microsoft's stock has increased by more than 10% year to date, trailing competitors like Amazon (AMZN) and Alphabet, the parent company of Google (GOOG, GOOGL), which have increased by 22% and 15%, respectively. Microsoft's stock has increased 32% over the past year, while Amazon's has increased 67% and Google's has increased 47%.

The three corporations are competing to see which can reorganize their internal teams like Google or make significant investments in outside organizations like OpenAI and Anthropic in order to provide the most comprehensive AI solutions to enterprise customers.

Wall Street expects Microsoft to report earnings per share of $2.83 on revenue of $60.88 billion for the quarter. Microsoft posted EPS of $2.45 on revenue of $52.86 billion for the same time previous year.

Analysts anticipate that Microsoft will report quarterly commercial cloud revenue of $33.93 billion, up 19% over the previous year. Wall Street predicts that Microsoft will announce business sector sales of $19.54 billion for productivity and business processes, $26.25 billion for intelligent cloud, and $15.07 billion for more personal computing.

On Tuesday, Microsoft said that Coca-Cola (KO) had inked a five-year, $1.1 billion deal to utilize the software giant's AI technology and Azure cloud services. This news gave Microsoft a big boost in its AI ambitions.

Microsoft senior vice president and chief commercial officer Judson Althoff said in a statement, "Through our long-term partnership, we have made significant progress to accelerate system-wide AI transformation across The Coca-Cola Company and its network of independent bottlers worldwide."

Since launching its redesigned version of Bing and AI chatbot in February 2023, Microsoft has released a plethora of new AI features and services for its consumer platforms, enterprise and productivity products, and chatbot.

Microsoft stated in March that it had hired Mustafa Suleyman, another co-founder of Inflection AI and DeepMind AI, Karén Simonyan, and several other employees. Suleyman will be joining Microsoft as the CEO of the company's artificial intelligence division.

Microsoft and French AI firm Mistral announced a multiyear cooperation in February, whereby Microsoft will make Mistral's models available on its Azure platform.

Shayne Heffernan