Microsoft (MSFT) is scheduled to report its fourth-quarter earnings after the market closes on Tuesday, as Wall Street continues to look for signs that the massive wave of AI investments by big tech companies is starting to pay off.
For the quarter, Microsoft is expected to report earnings of $2.94 per share on revenue of $64.5 billion, according to data compiled by Bloomberg. Microsoft reported earnings of $2.69 per share on revenue of $56.2 billion in the year-ago period.
Cloud revenue is expected to reach $36.8 billion, while Intelligent Cloud revenue, which includes Azure, is expected to reach $28.7 billion.
In the previous quarter, Microsoft announced that AI services contributed 7 percentage points of growth to Azure and other cloud services revenue. That was up from 6 percentage points in Q2 and 3 percentage points in Q1. The company initially started reporting AI contributions in Q4 of last year, saying that AI added 1 percentage point of growth to Azure at the time.
Microsoft shares are up 13% so far this year.
Microsoft’s report follows an earnings announcement last week from Alphabet (GOOG, GOOGL), Google’s parent company, in which the company said it was seeing a surge in cloud revenue, partly due to interest in AI products.
Still, Google didn’t provide specific numbers on the impact of AI on its cloud business. Some analysts, such as UBS Global Research’s Stephen Ju, predict that revenue growth from the company’s AI spending won’t be visible until the first half of 2025.
“Our controls for Microsoft were robust again this quarter as we believe the AI tidal wave with Redmond at the helm is accelerating the cloud deal flow for Azure with strong momentum through the remainder of 2024/2025,” Wedbush analyst Dan Ives wrote in an investor note ahead of Microsoft’s announcement.
According to Karl Keirstead, an analyst at UBS Global Research, Microsoft has also taken more market share from Google and Amazon.
“In terms of share shifts between AWS, Microsoft Azure and Google Cloud, the most consistent theme across this round of checks was the number of customers and partners reporting that Microsoft gained more share as a result of its early lead in AI,” Keirstead wrote in a recent note on the three major cloud players.
“This has been a recurring theme across audits over the past 6-12 months and the commentary on Azure’s relative strength felt consistent with previous audits,” he added.
In addition to how much Microsoft is making from AI, investors will want to know how much more the company plans to spend on the technology in the future. In Q3, Microsoft reported capital expenditures of $14 billion as it continues to build out its AI infrastructure.
During Alphabet’s earnings call, CFO Ruth Porat said the company spent $13 billion on capital expenditures, up from $12 billion in the previous quarter. She added that the vast majority of that spending went to AI.
Amazon (AMZN) is expected to report earnings on August 1.
Google shares are up 22% so far this year, while Amazon shares are up 23%.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
For the latest earnings reports and analysis, earnings rumors and expectations, and company earnings news, click here
Read the latest financial and business news from Yahoo Finance