MSFT: Microsoft Stock Slips as Cloud Growth Stalls Despite $23 Billion Splurge on AI

Software giant is looking to capture a huge share in the AI market and is allocating a total of $80 billion for the effort.

☁️ Shares Drop, Cloud Disappoints

• Microsoft stock MSFT tumbled 5% ahead of the opening bell Thursday after the company posted its earnings report, which invoked a broad “meh” reaction from investors. The gist of it: cloud sales disappointed, which is something you don’t want to do in times of AI adoption moving at breakneck speed.
• The tech titan posted $40.9 billion in revenue for its cloud division where AI lives and grows. While the figure was up 21% from last year, it missed Wall Street’s expectations of $41.1 billion.

✌️ Double Beat, Served Right

• The company’s earnings per share arrived at $3.23 a pop on overall revenue of $69.6 billion. The forecast was sitting at $3.11 in earnings per share on revenue of $68.9 billion. That’s what Wall Street calls a double beat.
• “We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead,” CEO Satya Nadella said in the earnings release.

😉 Good for $80 Billion?

• Another thing that caused investors to look away was the company’s excessive spending on AI. For the quarter ending December, Microsoft’s capital expenditures hit $22.6 billion, surpassing Wall Street estimates of $15.6 billion. The figure was up from $9.7 billion posted a year ago.
• For the current fiscal year, Microsoft said it plans to allocate a total of $80 billion to capital expenditures as it tries to capture as much as it can in the burgeoning AI space.