What’s going on?
Microsoft announced better-than-expected results late on Tuesday, and impressed investors will likely be seeing stars – or more aptly, primary-colored clouds.
What does this mean?
Microsoft’s stock price has hopped up by nearly 20% this year, so the bar for this round of results was set high. But the software heavy-hitter cleared that and more, posting revenue and profit that easily glided over expectations. See, despite being far from peak fitness, the firm’s personal computing business – which features ChatGPT-powered Bing – posted a smaller drop than expected. And sure, Microsoft had already forecast that growth for its crucial cloud computing business Azure would slow to around 26% versus last year – but investors feared it’d be worse. No wonder, then, they cheered Azure’s 27% growth, initially sending the shares 4% higher after hours.
Why should I care?
Zooming in: Reach for the clouds.
The word “Azure” might refer to the color of a bright blue sky, but Microsoft’s future will likely be full of heavy clouds – a perfect forecast in the firm’s eyes. Consulting firm Gartner estimates that companies will funnel over half of their IT spending into cloud technology come 2025, and that chunk could be even higher if artificial intelligence (AI) really takes off. No wonder, then, that investors are laser-focused on Azure’s performance: the cloud business will dictate the firm’s stock price for some time to come.
The bigger picture: Not-so-problem child.
Investors could breathe a second sigh of relief when Google-parent Alphabet reported results on Tuesday too: YouTube – the firm’s current problem child – reported better-than-expected advertising revenue, and the firm announced a whopping $70 billion stock buyback. But with Alphabet’s core advertising business buckling under the weight of economic pressures, investors are firmly focused on the firm’s growth plans. Specifically, how it’ll catch up to its rivals’ artificially intelligent initiatives.
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Originally Posted April 25, 2023 – Bing It On
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