Microsoft to invest more in AI as cloud revenue growth slows

In the appearance of last Tuesday, January 24, Microsoft announced that it will bet on incorporate artificial intelligence into all your products and services due to the demand that this represents in many companies around the world. The decision, announced by its CEO, Satya Nadellais derived before the stoppage of revenue from business in the cloud.

The situation for Microsoft has been critical quarter after quarter and no improvement is expected in the short term, in such a way that the forecasts for 2023 are not rosy at all. Without going any further, total cloud revenue for the second quarter of fiscal year 2023 is expected to be in the $21.5 billionthat is, a 29%. On the surface, it might seem like a good figure, although it is insufficient if we compare it with the same period of the previous year, where a growth rate of 31% was registered.

The forecasts for the third quarter of the year are not very positive either, since they expect their gross margin to decrease by one percentage point. It so happens that both microsoft azure Like other cloud services, their evolution has come to a standstill, which is striking since in recent years they have grown by 38%, which represents a 4% decline. Azure Q3 growth will be reduced by four-five points as constant currencyaccording to the words of Amy hoodMicrosoft’s chief financial officer.

For Nadella, the serious economic recession that is affecting the entire world, as well as the economic crisis that is hitting the technology sector hard, would be the main causes. And it is that customers used to invest without fear in digital spending in the cloud, but now it is looked at with a magnifying glass. Currently companies want get the maximum return on your investment and save on expenses to invest in new workloads, although this business optimization format is temporary and is expected to last a maximum of one year.

Microsoft has been forced to reduce its growth outlook for other parts of its business for the next quarter. Thus, they foresee four points of negative impact on income from productivity and business processesthree points in cloud intelligent and two points in personal computing.

It is the chronicle of a death foretold, as they are seeing how Windows devices and OEMs continue to experience serious falls in the market, being the usual trend until pre-pandemic levels are recovered.

AI as a solution

Microsoft is working to start new business routes and invest in artificial intelligence on different platforms that help companies to assume greater workloads. This is how they have invested billions of dollars more in OpenAI for the evolution of ChatGPT and the application of it to their tools.

It is an economic segment in constant evolution, and whose forecasts are expected to improve so far this year. Not only is it a magnet for new digital investors, but it also creates unprecedented market need. Microsoft has been able to incorporate AI into services such as GitHub Copilot Y Azure MLexperiencing a growth of more than 100% in the last five quarters.

Microsoft’s figures

During the analyzed quarter, the technology company registered $52.7 billion in revenuean increase of 7% compared to the same quarter last year, which represented an increase of 1% year-on-year in terms of net income.

Microsoft experienced a increase in productivity and business processesregistering sales with a value of $17 billion, 13% more than in the same quarter of the previous year. In fact, advertising revenue on LinkedIN was 14% more.

With the announcement of the dismissal of 10,000 employees, 5% of its workforce, the company has had to assume a extra expense of 1,200 million dollars in compensation. Added to this are other expenses related to hardware and lease consolidation.

The same way, personal computing division revenue down 16% in constant currency to $14.2 billion, resulting in Xbox, Windows OEM, and other commercial products experiencing declines of 8%, 39%, and 3%, respectively. With respect to revenue from devices, within this category, there was a 34% decline in constant currency.

With these figures in hand, Microsoft only has to renew or die, and therefore focus on new business lines and take advantage of the high performance of artificial intelligence and its applications to continue consolidating itself as a true technological giant.

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