US Stock Earnings Preview: Betting on Artificial Intelligence, What to Watch in Microsoft's Earnings Report?

Microsoft will release its fourth-quarter results on January 29th, local time.

Let's first take a look at what was revealed in Microsoft's third-quarter earnings report. In the third-quarter earnings report of 2024, we can see that Microsoft's cloud business revenue exceeded $38.9 billion, a 22% year-on-year increase.

And the revenue of the artificial intelligence business is expected to exceed an annualized revenue of $10 billion in the next quarter, making it the fastest business in the company's history to reach this milestone.

Indeed, in 2024, artificial intelligence was undoubtedly the top highlight among Microsoft's major initiatives. CEO Satya Nadella once stated in an earnings conference, "Artificial intelligence is rapidly transitioning from the discussion stage to the application stage."

The promotion of Copilot has attracted a large number of enterprise customers for Microsoft and paved the way for the commercialization of AI technology.

Therefore, we need to closely monitor whether the growth rate of the artificial intelligence segment in the fourth-quarter earnings report meets expectations.

On the other hand, Microsoft's gaming business is facing the challenge of structural adjustment.

Xbox hardware sales have declined. The market competition has become increasingly fierce, and Microsoft's product strategy in the gaming hardware sector may need to be adjusted.

Also, the acquisition of Activision Blizzard has not fully realized its profit potential in the short term.

There are issues like integration difficulties between different corporate cultures and game development progress delays. Microsoft needs to strike a balance between the AI and gaming sectors to achieve long-term sustainable growth.

Next comes the Azure cloud service. In terms of infrastructure, Azure has seen an increase in market share, with over 39,000 customers. Its data centers are distributed across more than 60 regions globally, and new cloud and AI infrastructure investments have been announced in Brazil, Italy, Mexico, Sweden, etc.

The rapid growth of the Azure cloud service has become an important pillar of the company's revenue, which is also a key aspect we need to pay close attention to in the earnings report.

At the same time, investors are concerned about whether good progress has been made in the company's partnership with OpenAI.

Judging from the stock price chart, Microsoft's stock price has experienced a downward adjustment several times after the release of its earnings reports. Therefore, investors should trade with caution.$MSFT