Microsoft may own the generative artificial intelligence market so far, but executives warned that the vendor won’t see much of that potential revenue until the winter—during the second half of its 2024 fiscal year.

Microsoft CFO Amy Hood told listeners on the vendor’s earnings call Tuesday for the fourth fiscal quarter that releasing more pricing information for Copilots, moving them through the preview and general availability process and then selling them all take time.

“Even with strong demand and a leadership position, growth from our AI services will be gradual as Azure AI scales and our Copilots reach general availability dates. … I do think this is really about pacing,” Hood said.

[RELATED: Microsoft CEO Nadella: AI Partner Opportunity Could Reach $7T]

Microsoft 4Q Results

Microsoft is “aggressive in meeting the demand curve and focusing on the transition and growth in gross margins and delivering the operating leverage,” Hood told analysts on the call. But the Redmond, Wash.-based vendor still expects year-over-year growth from the prior fiscal year, which ended June 30.

“To support our Microsoft Cloud growth and demand for AI platform, we will accelerate investment in our cloud infrastructure,” she said. “We expect capital expenditures to increase sequentially each quarter through the year as we scale to meet demand signals.”

However, gross margins should scale faster than in past technology adoption, she said.

“We start out in a different place with more of a shared platform, which allows us to scale those gross margins a bit faster than last time,” she said. “And we do expect … the pace of this adoption curve, we do expect to be faster. … We’re talking about all that and going through that transition while delivering in FY ’24 over FY ’23, effectively, a point higher operating margins.”

While the vendor expects to report in its next quarterly earnings that Microsoft Cloud gross margin percentage decreased by a point year over year, that decrease will be due to an accounting change instead of spending overtaking revenue, Hood said.

“We are committed to driving operating leverage, and therefore we will manage our total cost growth … in line with the demand signals we see as well as revenue growth,” she said.

She said that to expect higher cost of goods sold (COGS) year over year with operating expense growth low as Microsoft prioritizes spending. “We expect full-year operating margins to remain flat year over year.”

When asked about what the capital spending includes, Hood said that it includes physical data centers, GPUs, CPUs, networking equipment and other items and includes accelerations of normal Azure workloads and AI workloads.

When asked about gross margins in the future, Hood said that she expects them “to transition over time just like they did in the prior cloud transition” and “the gross margins of the workloads to be different just like they are in the cloud today.”

Microsoft’s stock fell by about 4 percent after hours to about $338 a share.