Microsoft Earnings Takeaways: Cloud, Generative AI, The Path To E7
Wade Tyler Millward
Analyst reports point to the potential for Azure deceleration slowing, an end to customers optimizing cloud spend and the sales potential of generative AI.
Better-than-expected results from Microsoft’s latest earnings—not to mention those of cloud rivals Google and Amazon Web Services—led to a mix of analyst reports hopeful for Azure deceleration slowing, an end to customers optimizing cloud spend and the sales potential of generative AI.
One analyst report even speculated on a price increase to Microsoft productivity applications once the Redmond, Wash.-based vendor allows more access to Copilot. Microsoft could even roll out an E7 license type going beyond the $38-per-user-a-month E5 license, according to Credit Suisse.
“We believe MSFT [MIcrosoft] will seek to monetize the addition of basic M365 Copilot and other GPT functionality first through a broad-based price increase to reflect the value of these productivity enhancements, then creating a new E7 bundle, to reflect the addition of basic AI/GPT functionality into the Office suite,” according to a report from the investment firm.
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Microsoft Third-Quarter 2023 Results
Microsoft reported results Tuesday for its third fiscal quarter. The quarter ended March 31.
On the earnings call Tuesday, Microsoft Chairman and CEO Satya Nadella was more upbeat than when he discussed new business slowdown on the January earnings call. That slowdown and an announced mass layoff of 10,000 Microsoft employees spoke to an overall trend in IT of businesses spending less on digital tools since the height of the COVID-19 pandemic.
“We do have new workloads starting,” Nadella said on the call. “Because if you think about it, during the pandemic, it was all about new workloads and scaling workloads. But pre-pandemic there was a balance between optimizations and new workloads. So what we’re seeing now is the new workloads start in addition to highly intense optimization.”
According to a Morgan Stanley report Wednesday, Microsoft’s better-than-expected results included:
*Azure growth of 31 percent year over year compared with Wall Street expectation of about 29 percent
*Expected Azure growth for this quarter between 26 percent and 27 percent year over year, more than Wall Street’s expected 24 percent year over year
*Total revenue for the quarter of $52.9 billion beat Wall Street expectations by about $2 billion, or 3.6 percent
Here’s what else you need to know from Microsoft’s third-fiscal-quarter earnings.