Microsoft’s (MSFT) stock is facing pressure on Wednesday following its fiscal fourth quarter earnings report. Despite beating estimates on both revenue and earnings, the tech giant fell short on Intelligent Cloud revenue expectations. Piper Sandler equity research analyst for cloud software and analytics Brent Bracelin joins Market Domination to discuss whether AI expectations for tech companies are too lofty.
Bracelin identifies the Azure business as “the primary growth engine” for Microsoft. While the company increased spending on AI and cloud infrastructure during the quarter, the report showed slowing growth in the Azure business, which Bracelin notes is “a little bit of a confusing thing for investors”. However, he suggests that reacceleration in this segment could occur as early as next year, saying there were some macro headwinds for the business in the quarter.
“I think it’s important to take a step back, look at the bigger picture here,” Bracelin told Yahoo Finance. He points out that it took Microsoft 13 years to build the Azure business to its current state, investing nearly $179 billion. “We’re talking now adding the next $100 billion in three years, so you’re gonna compress 13 years of capex spend in three years to add the next $100 billion.”
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