Microsoft $MSFT AI Boost Possible

After the bell on Tuesday, Microsoft (MSFT) will disclose its fiscal fourth quarter results while Wall Street is searching for evidence that the huge wave of artificial intelligence expenditures among Big Tech companies is beginning to pay off.

Based on data gathered by Bloomberg, Microsoft is projected to show quarterly earnings per share of $2.94 on revenue of $64.5 billion. During the same time previous year, Microsoft recorded EPS of $2.69 on revenue of $56.2 billion.

With Intelligent Cloud revenue—which includes Azure—estimated to reach $28.7 billion—Cloud revenue is expected to come in at $36.8 billion.

Microsoft said in its last quarter that 7 percentage points of growth in Azure and other cloud services revenue came from artificial intelligence technologies. That increased from 3% points in Q1 and 6% points in Q2. Originally disclosing AI contributions in Q4 of last year, the company said AI added 1% point of growth to Azure at the time.

Microsoft's revelation follows rival and Google parent Alphabet's (GOOG, GOOGL) earnings announcement last week, during which the company stated it is witnessing an increase in cloud income somewhat owing to interest in AI technologies.

Still, Google did not provide exact figures on the effect of artificial intelligence on the cloud business, allowing some analysts such as Stephen Ju of UBS Global Research to forecast that income gains from the company's AI spending might not materialize until the first half of 2025 at the earliest.

"We believe the AI tidal wave with Redmond in the driver's seat is accelerating cloud deal flow for Azure with strong momentum into the rest of 2024/2025, thus our checks for Microsoft have been robust this quarter again," Wedbush analyst Dan Ives wrote in an investor note ahead of Microsoft's announcement.

Microsoft has also been capturing more market share from Google and Amazon, claims UBS Global Research analyst Karl Keirstead.

"In terms of share shifts among AWS, Microsoft Azure, and Google Cloud, the most consistent theme in this round of checks was the number of customers and partners that cited share gains by Microsoft resulting from its early lead on the AI front," Keirstead wrote in a recent note on the three main cloud players.

"This has been a recurring theme from checks over the last 6-12 months and the commentary about Azure's relative strength felt consistent with prior checks," he remarked.

Investors will be interested in knowing how much more Microsoft intends to spend on the technology ahead outside of its current AI profits. As it keeps expanding its artificial intelligence infrastructure, Microsoft revealed capital expenditures of $14 billion in Q3.

CFO Ruth Porat of Alphabet said on its earnings call that the business spent $13 billion on capital expenditures—up from $12 billion in the previous quarter—mostly on artificial intelligence.

On Aug. 1, Amazon (AMZN) is scheduled to reveal results.

Year to date Google's shares are up 22%; Amazon's are up 23%.

Shayne Heffernan