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Strength in Azure Cloud to Aid Microsoft's (MSFT) Q2 Earnings
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Microsoft’s (MSFT - Free Report) second-quarter fiscal 2024 results, scheduled to be reported on Jan 30, are likely to be driven by the consistent growth in its cloud platform, Azure.
For the fiscal second quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) between $21.5 billion and $25.4 billion.
Our model estimate for Intelligent Cloud revenues is currently pegged at $25.11 billion, indicating 16.8% growth from that reported in the year-ago quarter.
Microsoft is benefiting from continued demand for cloud infrastructure monitoring, web-based application performance management and human capital management solutions, fueled by the increasing migration of workloads to the cloud.
In Azure, Microsoft expects revenue growth in the range of 26-27% at cc, with increasing contributions from all Azure AI services.
In the fiscal first quarter, Azure’s year-over-year top-line growth rate of 29% (up 28% at cc) was higher than 26% (up 27% at cc) reported in the previous quarter. The growth continues to be driven by Azure consumption-based business and the company expects the trends from the fiscal first quarter to continue into the second quarter. Microsoft’s per-user business should continue to benefit from momentum in the Microsoft 365 suite.
This Zacks Rank #2 (Buy) company is also witnessing increasing momentum with Azure Arc, which now has 21,000 customers, up 140% year over year, including Carnival Corp., Domino’s and Thermo Fisher. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Azure’s increased availability in more than 60 announced regions globally is expected to have strengthened Microsoft’s competitive position in the cloud computing market, dominated by Amazon’s (AMZN - Free Report) division, Amazon Web Services (“AWS") and Alphabet’s (GOOGL - Free Report) Google Cloud.
In the last reported quarter, AWS revenues (16.1% of sales) rose 12.3% year over year to $23.06 billion. AWS’ operating income was $6.98 billion, up 29.1% year over year. The expansion of its AWS portfolio has been helping Amazon to maintain its dominance in the cloud domain by gaining more customers.
Alphabet’s Google Cloud revenues rose 22.5% year over year to $8.41 billion, accounting for 10.9% of the quarter’s total revenues. Google Cloud reported operating income of $266 million compared with a loss of $440 million in the year-ago quarter.
Microsoft Leads Generative AI Race With Azure AI
Azure AI provides access to best-in-class frontier models from OpenAI and open-source models, including the company’s own, as well as from Meta and Hugging Face, which customers can use to build their own AI apps while meeting specific cost, latency and performance needs.
As OpenAI’s exclusive cloud provider, Azure powers all of its workloads. More than 18,000 organizations, including Ikea, Volvo, Flipkart and Humane, now use Azure OpenAI Service.
The launch of enterprise capabilities of Azure OpenAI and Copilots across Microsoft 365, Dynamics 365 and Power Platform is expected to be a game changer.
In the to-be-reported quarter, Microsoft announced partnering with Meta Platforms to provide customers with more choice and security as they venture into the metaverse. MSFT is bringing Mesh for Microsoft Teams to Meta Quest devices. Mesh for Teams with Meta Quest Pro and Meta Quest 2 devices will enable people to connect and collaborate as though they are together in person.
In addition, Microsoft 365 apps will be available on Meta Quest devices, enabling people to interact with content from their favorite productivity apps, including Word, Excel, PowerPoint, Outlook and SharePoint within VR.
In the to-be-reported quarter, Siemens (SIEGY - Free Report) and Microsoft announced a new strategic partnership to drive cross-industry AI adoption. The companies are introducing Siemens Industrial Copilot, an AI-powered assistant aimed at improving human-machine collaboration in manufacturing.
In addition, the launch of the integration between Siemens Teamcenter software for product lifecycle management and Microsoft Teams will further pave the way to enabling the industrial metaverse. It will simplify the virtual collaboration of design engineers, frontline workers and other teams across business functions.
New Azure AI Studio is becoming the tool of choice for AI development in this new era, helping organizations ground, fine-tune, evaluate and deploy models, and do so responsibly.
Image: Bigstock
Strength in Azure Cloud to Aid Microsoft's (MSFT) Q2 Earnings
Microsoft’s (MSFT - Free Report) second-quarter fiscal 2024 results, scheduled to be reported on Jan 30, are likely to be driven by the consistent growth in its cloud platform, Azure.
For the fiscal second quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) between $21.5 billion and $25.4 billion.
Our model estimate for Intelligent Cloud revenues is currently pegged at $25.11 billion, indicating 16.8% growth from that reported in the year-ago quarter.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote
Continued Growth in Azure to Drive the Top Line
Microsoft is benefiting from continued demand for cloud infrastructure monitoring, web-based application performance management and human capital management solutions, fueled by the increasing migration of workloads to the cloud.
In Azure, Microsoft expects revenue growth in the range of 26-27% at cc, with increasing contributions from all Azure AI services.
In the fiscal first quarter, Azure’s year-over-year top-line growth rate of 29% (up 28% at cc) was higher than 26% (up 27% at cc) reported in the previous quarter. The growth continues to be driven by Azure consumption-based business and the company expects the trends from the fiscal first quarter to continue into the second quarter. Microsoft’s per-user business should continue to benefit from momentum in the Microsoft 365 suite.
This Zacks Rank #2 (Buy) company is also witnessing increasing momentum with Azure Arc, which now has 21,000 customers, up 140% year over year, including Carnival Corp., Domino’s and Thermo Fisher. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Azure’s increased availability in more than 60 announced regions globally is expected to have strengthened Microsoft’s competitive position in the cloud computing market, dominated by Amazon’s (AMZN - Free Report) division, Amazon Web Services (“AWS") and Alphabet’s (GOOGL - Free Report) Google Cloud.
In the last reported quarter, AWS revenues (16.1% of sales) rose 12.3% year over year to $23.06 billion. AWS’ operating income was $6.98 billion, up 29.1% year over year. The expansion of its AWS portfolio has been helping Amazon to maintain its dominance in the cloud domain by gaining more customers.
Alphabet’s Google Cloud revenues rose 22.5% year over year to $8.41 billion, accounting for 10.9% of the quarter’s total revenues. Google Cloud reported operating income of $266 million compared with a loss of $440 million in the year-ago quarter.
Microsoft Leads Generative AI Race With Azure AI
Azure AI provides access to best-in-class frontier models from OpenAI and open-source models, including the company’s own, as well as from Meta and Hugging Face, which customers can use to build their own AI apps while meeting specific cost, latency and performance needs.
As OpenAI’s exclusive cloud provider, Azure powers all of its workloads. More than 18,000 organizations, including Ikea, Volvo, Flipkart and Humane, now use Azure OpenAI Service.
The launch of enterprise capabilities of Azure OpenAI and Copilots across Microsoft 365, Dynamics 365 and Power Platform is expected to be a game changer.
In the to-be-reported quarter, Microsoft announced partnering with Meta Platforms to provide customers with more choice and security as they venture into the metaverse. MSFT is bringing Mesh for Microsoft Teams to Meta Quest devices. Mesh for Teams with Meta Quest Pro and Meta Quest 2 devices will enable people to connect and collaborate as though they are together in person.
In addition, Microsoft 365 apps will be available on Meta Quest devices, enabling people to interact with content from their favorite productivity apps, including Word, Excel, PowerPoint, Outlook and SharePoint within VR.
In the to-be-reported quarter, Siemens (SIEGY - Free Report) and Microsoft announced a new strategic partnership to drive cross-industry AI adoption. The companies are introducing Siemens Industrial Copilot, an AI-powered assistant aimed at improving human-machine collaboration in manufacturing.
In addition, the launch of the integration between Siemens Teamcenter software for product lifecycle management and Microsoft Teams will further pave the way to enabling the industrial metaverse. It will simplify the virtual collaboration of design engineers, frontline workers and other teams across business functions.
New Azure AI Studio is becoming the tool of choice for AI development in this new era, helping organizations ground, fine-tune, evaluate and deploy models, and do so responsibly.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.