Microsoft has just given the AI sceptics a lot less to work with, growing faster than expected and guiding for even more to come. Azure growth accelerated to 48%, up from 42% last quarter and comfortably ahead of the 45% Wall Street had roughly pencilled in. Microsoft also put a dollar figure on the business for the first time at USD$33 billion for the quarter. Josh Gilbert, Lead Analyst Middle East at etoro explains that Azure was always going to be the number that decided how this result was received, and it’s the clearest evidence yet that the billions Microsoft has poured into its AI build-out are turning into revenue.
Azure also managed to hit that number despite some third-party data centre capacity arriving later than planned. With management guiding for growth of around 49% next quarter, there’s little reason to think the acceleration has peaked. Capacity has become the real battleground between the cloud giants right now, and Microsoft is proving it can scale its infrastructure quicker than the market had anticipated.
Capex came in roughly USD$6.5 billion below street estimates, and Microsoft still delivered accelerating growth, which is exactly what investors needed to see in an earnings season where the market has shown very little patience for AI spending running ahead of revenue. CFO Amy Hood put the shortfall down to delayed capacity deliveries, so it seems more of a timing matter rather than restraint. I’d expect spending to step back up as that capacity lands.
The AI race is no longer rewarding whoever spends the most, it’s rewarding whoever can show the receipts, and Microsoft’s are looking very healthy.
