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Microsoft abandoned by impatient investors

Microsoft porzucany przez niecierpliwych inwestorów

Azure's growth lower than expected

The main source of disappointment is the slower-than-expected growth of the "Azure" cloud division. In the fourth quarter of the 2023/2024 fiscal year, "Azure" recorded a revenue increase of 29%, which was lower than the expected growth of 31%. Moreover, this growth was lower than in the previous quarter, which further increased investor concerns.

Brett Iversen, head of investor relations at Microsoft, noted that eight percentage points of "Azure's" growth were attributed to artificial intelligence (AI) applications, which was a one percentage point increase from the previous quarter. Iversen emphasized that demand for AI remains a key growth driver, but it has not met analyst expectations.

Microsoft's billion-dollar investments

In recent years, Microsoft has invested billions of dollars in building and expanding data centers, especially with AI applications in mind. These costs rose nearly 78% to $19 billion, far exceeding the 53% increase analysts had predicted. The company argued that such investments are necessary due to computing power constraints and continued high demand for AI applications.

A similar strategy was also adopted by Microsoft's competitor, Alphabet, which also emphasized that the risk of insufficient investment in AI infrastructure is much greater than investing too large amounts. Still, investors ignored Alphabet's revenue and profit growth and sold its shares, showing widespread unease in the tech sector.

Future perspectives

Microsoft's total revenue rose 15% to $64.7 billion, slightly exceeding market expectations. This was largely due to the rebuilding of the PC division, which includes the "Windows" operating system and the "Xbox" gaming console. Revenues in this segment increased 14% to $15.9 billion.

Analyst Igor Tishin from asset manager Harding Loevner warns against overly pessimistic assessments of Microsoft's business prospects. “While the focus is on consumer applications such as ChatGPT, generative AI in the enterprise sector potentially offers even greater opportunities. Microsoft is extremely well positioned to take advantage of this,” says Tishin.

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