Key Takeaways
- Microsoft is expected to report its best revenue in almost two years and solid increases to both net income and EPS for the second quarter of fiscal 2024.
- The company’s revenue growth may be driven by strong gains to its Intelligent Cloud segment revenue, which includes many of its AI-powered offerings.
- Microsoft faces some backlash for its adoption of AI, including a lawsuit by the New York Times over alleged copyright infringement. The company is also being scrutinized by the U.K.’s competition watchdog, while the FTC has launched an inquiry into its partnership with OpenAI.
Tech titan Microsoft Corp. (MSFT), which just became the second company ever to reach a market capitalization of $3 trillion, is due to report its second-quarter fiscal 2024 earnings on Tuesday after the market closes. Analysts expect Microsoft to post its highest revenue in seven quarters and an uptick in EPS, while the company’s AI-powered cloud services continue to soar.
Analysts forecast that Microsoft will announce net income of $20.6 billion, or $2.77 per share, compared with $17.4 billion and $2.20, respectively, in the prior-year quarter, according to data compiled by Visible Alpha. The company is also expected to report total revenue of $61 billion, a nearly 16% improvement year-over-year and the sharpest increase in this area in close to two years.
| Microsoft Key Stats | |||
|---|---|---|---|
| Analyst Estimates for Q2 FY2024 | Q1 FY2024 | Q2 FY2023 | |
| Revenue ($B) | 61.0 | 56.5 | 52.7 |
| Earnings Per Share ($) | 2.77 | 2.99 | 2.20 |
| Net Income ($B) | 20.6 | 22.3 | 17.4 |
Key Metric: Intelligent Cloud Revenue
Microsoft has made a major bet on artificial intelligence (AI), investing billions of dollars with ChatGPT-creator OpenAI to integrate AI into many of its products. Much of Microsoft’s venture into AI is contained within its Intelligent Cloud segment, home to Azure, Nuance, Windows Server and Enterprise Services, among other offerings. The investment seems to be paying off: a Morgan Stanley survey of CIOs found that more than two-thirds planned to adopt Microsoft AI tools in the coming year.
Microsoft’s Intelligent Cloud quarterly revenue, which has roughly doubled in the last three years, is expected to reach an all-time high of $25.3 billion in the latest quarter, according to Visible Alpha. This would represent a roughly 18% increase YOY.
Business Spotlight
While Microsoft’s AI adoption might spell big gains for its top and bottom lines, the company has run into legal issues as a result as well. Late in 2023, the New York Times sued Microsoft and OpenAI for copyright infringement, contending that ChatGPT was trained using millions of copyrighted articles. The suit calls for “billions of dollars in statutory and actual damages.” The company is also being scrutinized by the U.K.’s competition watchdog, which is evaluating whether Microsoft’s partnership with OpenAI could affect competition. Also recently, the Federal Trade Commission launched an inquiry into Microsoft and OpenAI as part of a broader look at investments and partnerships in the AI space.
Microsoft shares were among the best-performing in the already-hot tech space last year. The company’s stock has risen about 63% over the past year as of the end of trading Friday.