The company’s revenue of $56.2 billion surpassed Wall Street expectations, but the slowdown in growth for its cloud service Azure was a disappointment
On Tuesday, Microsoft’s shares declined after the company announced a slowdown in certain parts of its business growth, despite its numerous investments in AI, including partnerships with OpenAI and Meta.
Exceeding Wall Street’s projections, the tech firm achieved $56.2 billion in revenue. However, its latest earnings report revealed a deceleration in revenue growth for its cloud service Azure, with a 26% growth in the fourth quarter compared to 27% in the previous quarter.
The release of Microsoft’s earnings report comes during a pivotal moment in the AI arms race. Valuations of tech firms have surged due to substantial investments in AI-powered technology, such as Microsoft’s revamped Bing search engine chatbot. This quarter is seen as a critical test to determine whether tech companies can deliver on their AI-related promises.
In recent weeks, the company has made several announcements that have strengthened its position in the highly competitive AI space.
According to Satya Nadella, Microsoft’s chairman and CEO, organizations are eager to apply the next generation of AI quickly and responsibly to tackle significant opportunities and challenges. He emphasized their commitment to lead in the new AI platform shift, enabling customers to maximize the value of their digital investments through the Microsoft Cloud and driving operational efficiency.
Microsoft has strategically diversified its AI endeavors across the industry. Notably, it teamed up with Meta to release the open-source large language model Llama 2 for free commercial and developer use. Additionally, earlier this year, the company expanded its collaboration with OpenAI, allowing Microsoft Azure and various AI tools to benefit from ChatGPT’s creator’s AI capabilities. These partnerships are seen by experts as positioning Microsoft ahead of its competitor, Google, which also reported its quarterly earnings on Tuesday.
According to Jeremy Goldman, Insider Intelligence’s principal analyst, Microsoft is making strides in its search advertising business and commercializing generative AI in ways that Google has yet to achieve.
Conversely, Google witnessed a rise in its shares following the release of its earnings report. The company surpassed Wall Street expectations and experienced revenue growth, largely attributed to the growing demand for its cloud services. This growth is expected to persist as AI tools are increasingly implemented and adopted.
