Microsoft's Azure Slowdown Offsets Optimism About AI Growth

tech.hindustantimes.com:

Microsoft Corp. posted tepid quarterly sales growth and forecast a continued slowdown in its Azure cloud-services business, overshadowing optimism about customer interest in new artificial intelligence-powered products. Shares were down about 3% Wednesday morning in New York.

While overall results in the period ended June 30 topped analysts' projections, Azure revenue growth slipped to 27%, excluding currency impacts, from 31% in the previous quarter. The world's largest software maker projected that Azure gains would slow further in the current quarter, and said it would boost spending to expand data centers for new cloud services — while expecting only a gradual increase in AI revenue.

Chief Executive Officer Satya Nadella has unveiled an array of new AI programs — based on models from partner OpenAI — for most of Microsoft's major product lines, and demand has been strong for internet-based services that let customers use the OpenAI technologies. Still, the company's Office productivity suite including AI isn't yet broadly available, and overall spending on Azure services and Office applications is easing after several years of rising corporate investments. The company's lackluster Azure outlook stifled some hopes that the new offerings would jump-start growth in a business that has fueled the company's revival for the past decade but has decelerated in recent years.

“While Microsoft is better positioned than other cloud providers to monetize new AI investments, we think it can take a few quarters for that growth to kick in,” said Bloomberg Intelligence analyst Anurag Rana.

The shares fell to $340.16 as markets opened. The stock rose 18% in the three months ending in June, outpacing the 8.3% increase in the S&P 500 Index