Microsoft Predicts Explosion in AI Spending After Strong Results
Microsoft Corp. (NASDAQ: MSFT) has announced its financial results for the second quarter after the market closed on Tuesday, January 30.
Estimated reports: Data from Benzinga Pro indicates that analysts expect Microsoft to report second-quarter revenues of $61.10 billion.
The company’s revenue in the second quarter of last year was $52.74 billion. Microsoft has surpassed analysts’ revenue estimates in four out of the past five quarters.
Analysts predict that Microsoft’s earnings per share for the second quarter will be $2.78 compared to $2.32 in the previous year. The company has exceeded analysts’ earnings per share estimates for the past five consecutive quarters.
What analysts say: According to analyst Daniel Ives of Wedbush, Microsoft’s second-quarter report could be one of the most important events at the beginning of the earnings season.
Ives, who has an Outperform rating and a target price of $450 for Microsoft, said that the company’s report could be the top indicator in the earnings season regardless of the sector.
“Whether we’re talking about Artificial Intelligence giants Jensen and Nvidia or Microsoft with Nadella and Richmond, they are the foundations of cloud development for artificial intelligence applications worldwide, and now they are exploding with Microsoft’s results beyond the key barometer of AI spending pace,” said Ives.
Ives said that the second quarter could be good for Microsoft based on the growth of contracts in their Azure cloud.
“We expect a solid result for the end of December, hoping that Nadella and the rest of the company will exceed the top-line sales of $61 billion and earnings per share of $2.77. The key indicator will be the growth of Azure,” he added.
Ives said that 2024 brings strong applications of artificial intelligence for Microsoft and other companies, but 2025 is the “true year of breakthrough AI growth.”
“We believe that the stock value still does not reflect what we consider to be the next wave of cloud and artificial intelligence development coming to Redmond in 2024-2025 with a strong competitive edge in the cloud compared to Amazon and Google,” said Ives.
Ives said that the growing popularity of ChatGPT for Microsoft is just beginning to gain “momentum.”
“Overall, we believe this is the “moment of the iPhone” for Microsoft, where artificial intelligence will change the course of cloud development in Redmond for the next few years,” he said.
Here are other analysts’ ratings and target prices for Microsoft in January.
Piper Sandler: Overweight rating, target price $455
Truist Securities: Buy rating, target price $600
Exane BNP Paribas: Upgrade from Neutral to Outperform, target price $471
BMO Capital: Overweight rating, raised target price from $400 to $420
Key points to observe: Artificial intelligence is crucial for Microsoft’s report and conference call.
“We are accelerating the deployment of artificial intelligence across all layers of technology, for every role and business process, to generate productivity gains for our customers,” said Microsoft CEO, Satya Nadella, during the first-quarter report.
Microsoft’s quarterly report also comes in relation to concerns over deepfakes, which are images created using artificial intelligence depicting celebrities such as Taylor Swift that quickly became popular on social media.
Nadella called these images “alarming and scary” and said in an interview with NBC News that companies need to “act fast” to counter such images.
“Yes, we need to act. I think we all benefit when the online world is safe,” he said.
Another factor that could become important is Microsoft’s gaming division. The company recently announced layoffs in its Xbox and Activision Blizzard divisions, which it acquired. Comments about the strength or weakness of the gaming market may provide more insights into the reasons for the layoffs and the future of this sector.
Market activity for MSFT: Microsoft shares rose 1.43% to $409.72 on Monday’s market close, compared to a 52-week trading range of $242.20 to $409.98. Microsoft shares have risen 65% in the past year.
Read more: Microsoft Azure: Rapid Growth and Innovations in AI Signal Bright Future for Investors, According to Analysts
FAQ Section related to the article:
1. What were Microsoft’s financial results for the second quarter?
Microsoft reported revenues of $61.10 billion for the second quarter.
2. What were Microsoft’s revenues in the second quarter of the previous year?
The company’s revenues in the second quarter of the previous year were $52.74 billion.
3. What achievements of Microsoft were highlighted in the article?
Microsoft surpassed analysts’ revenue estimates in four out of the past five quarters. The company also exceeded analysts’ estimates for earnings per share for the past five consecutive quarters.
4. Why is Microsoft’s second-quarter report important?
According to Wedbush analyst, the second-quarter report from Microsoft could be one of the most important events at the beginning of the earnings season. It is also significant for the IT industry as a whole.
5. What did the Wedbush analyst say about Microsoft’s results?
According to the analyst, the growth of contracts in Azure could contribute to a good second quarter for Microsoft.
6. What is the analyst’s outlook on the development of artificial intelligence in Microsoft in the coming years?
The analyst has a positive outlook on the development of artificial intelligence in Microsoft and believes in the company’s potential in this field in the coming years.
7. What are the other analysts’ ratings for Microsoft?
Analysts’ ratings for Microsoft in January include: Piper Sandler – overweight rating, target price $455; Truist Securities – buy rating, target price $600; Exane BNP Paribas – upgraded from neutral to outperform, target price $471; BMO Capital – overweight rating, raised target price from $400 to $420.
8. Why is artificial intelligence crucial for Microsoft’s report?
Artificial intelligence is crucial because Microsoft is developing it at various levels and in various business areas, generating profits for its customers.
9. What are the concerns about deepfakes?
Deepfake is a technique
The source of the article is from the blog maestropasta.cz