By Olivia Clark and Ethan Brooks
April 24, 2024, 5:10 PM GMT+5
Updated 8 hours ago
Microsoft's Momentum in AI and Cloud Computing
A Microsoft logo displayed at their offices in Issy-les-Moulineaux near Paris, France, March 25, 2024. (Photo: REUTERS/Gonzalo Fuentes/File Photo)
April 24 (Reuters) - The forthcoming quarterly financial reports from major U.S. tech players are anticipated to indicate that Microsoft (MSFT.O) is narrowing the gap with cloud-computing frontrunner Amazon.com. Businesses are increasingly opting for Microsoft's services, lured by a range of innovative AI capabilities powered by OpenAI.
Based in Redmond, Washington, Microsoft has outpaced competitors like Amazon (AMZN.O) and Google-parent Alphabet (GOOGL.O) in introducing AI services. These include Copilot, a suite of AI tools integrated into Microsoft's business applications, launched last November at a subscription price of $30 per month.
Implications for Tech Stocks
The upcoming earnings report from Microsoft, due on Thursday, is expected to shed light on AI adoption trends and could influence the trajectory of tech stocks. The sector has seen a slowdown this month amid concerns about prolonged high interest rates in the U.S.
Industry analysts project that Microsoft, recently crowned the world's most valuable company surpassing Apple, will confirm that its substantial investments in generative AI are driving client adoption of its Azure cloud-computing platform.
Market Dynamics and Projections
RBC Capital Markets analyst Rishi Jaluria commented, "Azure is reaping benefits from the broader success of Microsoft's AI initiatives," predicting that Microsoft is poised to capture market share from Amazon.
Estimates suggest that Microsoft's revenue growth in the first quarter of 2024 could reach 15%, compared to 12.6% for Alphabet and 11.9% for Amazon, marking Amazon's slowest growth in three quarters.
According to Visible Alpha, Azure's growth is projected at 28.9% for the January-to-March period, outpacing Amazon Web Service's 14.9% and Google Cloud's 25%.
CFRA Research's Angelo Zino believes that AI services could contribute up to 8 percentage points to Azure's growth.
Future Outlook
Analysts anticipate a significant revenue boost from AI starting next year, with Morgan Stanley projecting a $5 billion revenue from Copilot for Microsoft's fiscal 2025.
In contrast, Google's AI efforts are perceived to require more time to translate into revenue, despite the company's positive share performance driven by optimism around its AI initiatives.
Amazon, while having made substantial investments in AI through its OpenAI competitor Anthropic, has yet to make major AI announcements. Analysts expect Amazon to narrow the AI capability gap with Microsoft in the coming years.
Conclusion
The evolving landscape of AI and cloud computing is set to intensify competition among tech giants. Microsoft's strides in AI innovation are positioning it as a formidable challenger to Amazon's cloud dominance, setting the stage for an intriguing market battle
