Microsoft Says It's Seeing More Demand for AI Than It Can Keep Up ...
After Microsoft (MSFT) reported fiscal first-quarter earnings that topped analysts' estimates, CFO Amy Hood disclosed that demand for artificial intelligence (AI) is surpassing their available capacity.
Surge in Artificial Intelligence Demand
Microsoft's Intelligent Cloud segment, particularly the Azure cloud computing platform, experienced significant growth in the quarter with a 20% year-over-year revenue increase to $24.09 billion, driven by the escalating demand for AI. However, the company's shares witnessed a decline following a caution that growth might slow down in the subsequent quarter.
Acceleration of AI Business
CEO Satya Nadella highlighted that the utilization of Azure’s Open AI service doubled in the last six months, propelling Microsoft's AI business towards an anticipated annual revenue run rate of $10 billion in the second quarter, marking it as the fastest-growing business in Microsoft's history.
Transformation in Business Applications Market
Nadella emphasized the transformative effect of AI on the business applications market, noting a transition among customers from traditional apps to AI-centric business processes.
Hood mentioned that Microsoft foresees a potential slowdown in Intelligent Cloud growth to a range of 18% to 20% in the second quarter, with Azure's growth expected to decelerate to between 31% and 32%, before regaining momentum in the latter part of the fiscal year.
Market Response and Outlook
Following the earnings call, Microsoft shares plummeted by over 5% in early trading on Thursday; however, despite these losses, the shares have accrued more than 8% since the beginning of the year.
UPDATE—Oct. 31, 2024: This article has been updated to reflect more recent share price information.
Source: Microsoft Fiscal Year 2025 First Quarter Earnings Conference Call.
