Microsoft to report fiscal fourth-quarter results as Wall Street eyes AI revenue, spending

Microsoft (MSFT) will report its fiscal fourth-quarter results after the close on Tuesday, as Wall Street continues to look for signs that the massive wave of AI investment among big tech companies is starting to pay off.

Microsoft is expected to post earnings of $2.94 per share on revenue of $64.5 billion for the quarter, according to data compiled by Bloomberg. Last year, Microsoft reported EPS of $2.69 on revenue of $56.2 billion in the same period.

Cloud revenue is expected to reach $36.8 billion, while Intelligent Cloud revenue, which includes Azure, is expected to reach $28.7 billion.

In the previous quarter, Microsoft reported that AI services contributed 7 percentage points to its Azure and other cloud services revenue growth. That was up from 6 percentage points in the second quarter and 3 percentage points in the first quarter. The company began reporting AI contributions in the fourth quarter of last year, saying AI added 1 percentage point to Azure growth at the time.

Microsoft shares are up 13% year-to-date.

Microsoft’s report follows rival and Google parent Alphabet’s (GOOG, GOOGL) earnings call last week, in which the company said it was seeing an increase in cloud revenue partly driven by interest in AI products.

However, Google has not provided specific numbers on the impact of AI on its cloud business, leading some analysts like Stephen Ju of UBS Global Research to predict that revenue benefits from the company’s AI spending may not come until the first half of 2025 at the earliest.

Microsoft CEO Satya Nadella speaks during the Microsoft Build conference at the Seattle Convention Center Summit Building in Redmond, Washington, on May 21, 2024. (Photo by Jason Redmond / AFP) (Photo by JASON REDMOND/AFP via Getty Images) — Microsoft CEO Satya Nadella speaks during the Microsoft Build conference at the Seattle Convention Center Summit Building in Redmond, Washington, on May 21, 2024. (Jason Redmond/AFP via Getty Images) (JASON REDMOND via Getty Images)

“Our controls for Microsoft were strong again this quarter as we believe the AI tidal wave with Redmond in the driver’s seat is accelerating the flow of cloud deals to Azure with strong momentum for the remainder of 2024/2025,” Wedbush analyst Dan Ives wrote in a note to investors ahead of Microsoft’s announcement.

Microsoft has also gained market share from Google and Amazon, according to Karl Keirstead, an analyst at UBS Global Research.

“In terms of market share shifts between AWS, Microsoft Azure, and Google Cloud, the most consistent theme across this round of reviews has been the number of customers and partners citing Microsoft’s market share gains resulting from its early lead on the AI front,” Keirstead wrote in a recent note on the three major cloud players.

“This has been a recurring theme in reviews over the past 6-12 months and the comments on Azure’s relative strength appear consistent with previous reviews,” he added.

Beyond the benefits Microsoft is getting from AI, investors will want to know how much the company plans to invest in the technology going forward. In the third quarter, Microsoft announced $14 billion in capital expenditures as it continues to build out its AI infrastructure.

On Alphabet’s earnings call, CFO Ruth Porat said the company spent $13 billion on capital expenditures, up from $12 billion in the previous quarter, adding that the vast majority of that spending was on AI.

Amazon (AMZN) is scheduled to report earnings on August 1.

Google shares are up 22% year-to-date, while Amazon shares are up 23%.