Shulou(Shulou.com)11/24 Report--

Beijing, July 26 (Xinhua)-- Microsoft released an aggressive spending plan to meet the strong demand for its new artificial intelligence services after its revenue and profits exceeded Wall Street expectations in the fourth quarter.

Under the plan, Microsoft will significantly increase the cost of building data centers to support artificial intelligence services. Amy Hood, CFO of the company, also said on an analyst conference call that the company's capital expenditure would grow quarter by quarter throughout fiscal 2024.

Microsoft shares fell about 4% in after-hours trading.

Wall Street is looking forward to how generative artificial intelligence will generate revenue for Microsoft, which has gained an early lead by investing in OpenAI, which developed ChatGPT that quickly became popular around the world after its release at the end of last year.

Microsoft is also integrating artificial intelligence technology into its own products, such as the "Copilot" service that adds $30 a month to Microsoft 365, which summarizes valuable emails every day for quick browsing. The company is also preparing to sell cloud computing services that can help other companies develop artificial intelligence services.

Microsoft's performance shows that the company's huge spending on artificial intelligence has exceeded revenue growth.

Although Azure sales rose slightly more than the market expected, Microsoft's quarterly capital expenditure was the highest in a single quarter since 2016. The company is also competing with other cloud computing providers for limited Nvidia chips, whose GPU is an important component in creating artificial intelligence products and services.

CFO Hood told analysts that while Microsoft will increase spending in fiscal year 2024, its operating margin will increase slightly after adjusting for changes in accounting rules. "the key to this is to really meet the demand curve." Hood said.

Mr Hood says it will take time to make a profit. She pointed out that Copilot is not ready for a full release and that the product may not really generate revenue until the second half of fiscal year 2024.

Microsoft expects Azure's revenue to grow 25-26 per cent in the first quarter at fixed exchange rates. The Visible Alpha expects the figure to be 25.6%, but the latter does not adjust for the exchange rate.

For divisions, including Azure, Microsoft expects a median revenue range of $23.45 billion in the first quarter. Analysts expect an average of $23.55 billion.

Microsoft's median forecast for first-quarter revenue for its Office unit is $18.15 billion, while analysts expect an average of $18.08 billion.

But Microsoft's median forecast for the Windows division was $12.7 billion, below the average analyst forecast of $13.14 billion.

Revenue rose to $56.2 billion in the fiscal fourth quarter, which ended June 30, beating analysts' average expectations of $55.5 billion. Net income per share was $2.69, higher than the average analyst estimate of $2.55.

Revenue from Microsoft's smart cloud unit, where Azure's cloud computing platform is located, rose to $24 billion, slightly exceeding average analyst expectations.

Azure's own revenue grew by 26%, exceeding Visible Alpha's growth forecast of 25.2%.

Microsoft does not disclose absolute revenue figures for Azure, the Microsoft business that best fits the recent artificial intelligence boom.

The decline in the PC business is still hitting Microsoft, with revenue from the Windows operating system division falling to $13.9 billion. Revenue from the division of LinkedIn social networking and Office productivity software grew to $18.3 billion. The results of both divisions slightly exceeded the average analyst expectations.

Microsoft's capital expenditure rose from $7.8 billion in the third quarter to $10.7 billion in the fourth quarter. They have previously told investors that their spending will gradually increase as the company builds data centres for artificial intelligence.

Microsoft has begun to integrate artificial intelligence into Azure, Microsoft 365, GitHub and a variety of developer tools.

Related readings:

"Microsoft announced its fourth-quarter results: net profit increased by 20% year-on-year, and revenue outlook for the next quarter fell short of expectations."

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