Artificial intelligence hype has gripped the business world and driven some consumers to the point of AI fatigue, but Wall Street remains obsessed with the technology and eager to understand what it means for companies’ bottom lines.
The topic of artificial intelligence dominated Microsoft’s conference call with investors and analysts after tech giants and OpenAI investors Posted outstanding earnings Tuesday. Of the eight analysts who took questions from senior executives, six asked about artificial intelligence, the company’s Copilot AI product, or how artificial intelligence could shape the overall business. This curiosity is not surprising. Despite the AI noise, few earnings reports have yet to quantify the technology’s power.
On October 18, ahead of Microsoft’s latest earnings report, analyst Alex Zukin warned in a report on Microsoft to Wolfe Research clients that without data to support the company’s claims that the technology is transformative, don’t be too cautious about investing in the technology. Artificial intelligence is invested in too many stocks. “While we were busy revising our estimates for Copilot’s size last quarter, investors appear to have hit a trough of AI disillusionment, questioning its actual capabilities, profitability and ultimately its lasting and sustainable competitive advantage,” Zu said. King wrote, market watch report.
Microsoft’s earnings report on Tuesday is one of the first when analysts may start to see the business impact of full-scale artificial intelligence adoption.
inside most recent quarterAs of September 30, Microsoft exceeded analysts’ expectations across the board. It generated revenue of $56.5 billion, beating consensus estimates by $2 billion. Adjusted earnings per share were $2.99, compared with expectations of $2.66. Since this time last year (just before OpenAI launched ChatGPT and triggered the artificial intelligence craze), Microsoft’s profits have grown 27%. The company’s shares rose 6.2% in after-hours trading, peaking at $350.90 per share.
Microsoft’s growth in the latest quarter stemmed from a business unit the company calls “Azure and other cloud services,” which oversees investments in artificial intelligence. Chief Financial Officer Amy Hood said in a conference call that this segment grew 29% from the previous fiscal year, 3 percentage points of which came from artificial intelligence services, which was due to “higher than expected consumption of artificial intelligence.” “While trends from previous quarters continued, growth exceeded expectations, driven primarily by increases in GPU capacity and better-than-expected GPU utilization for our AI services,” Hood said, referring to rendering. Graphics processing unit (GPU) computing technology for images is crucial in artificial intelligence. CEO Satya Nadella added that more than 18,000 organizations use Azure AI services, which include speech-to-text and facial recognition capabilities.
This quarter, Microsoft announced the integration of its AI-powered Copilot assistant into its office tools, including its web browser, Windows 11 desktop software and Microsoft 365 apps. The company launched Bing Chat in recent months, also powered by artificial intelligence, as a new way to search the web. The enterprise-focused Copilot in 365 will launch on November 1st.
Three analysts asked top executives how artificial intelligence will impact Microsoft’s future profit margins and other growth metrics. Jefferies’ Brent Thill puts it simply: “Can you sustain double-digit growth, especially as AI is going to be even stronger in the coming quarters?” Hood “We feel good about our ability to execute,” the reply came.
“Through Co-Pilot, we are creating a true era of artificial intelligence for people and businesses around the world,” Nadella said in the earnings report. “We are rapidly integrating artificial intelligence into every layer of the technology stack, every role and every role. business processes to improve customer productivity.”
Svlook
