Microsoft to Boost AI Infrastructure Spending Despite Slower Cloud Growth, Shares Drop
Microsoft plans to increase its spending on AI infrastructure this fiscal year, even as growth in its cloud business slows. This announcement triggered a 4% drop in the company’s share price, following an initial 7% decline. Along with tech giants like Google, Microsoft is heavily investing in data centers to capitalize on the AI boom, with its capital spending rising 77.6% to $19 billion in the fiscal fourth quarter, primarily for cloud and AI-related expenses.
Despite these significant investments, investors were disappointed by the slower growth of Microsoft’s Azure cloud service. The company forecasted a 28% to 29% growth for Azure in the upcoming quarter, slightly below market expectations. This follows a 29% increase in the previous quarter, which also fell short of estimates, signaling a slowdown from earlier months.
CEO Satya Nadella emphasized that AI services are becoming a major contributor to Azure’s revenue growth, with over 60,000 customers now using Azure AI—a nearly 60% increase from the previous year. Microsoft has integrated AI across its products, including its Bing search engine and productivity tools like Word, driven by its substantial investment in OpenAI.
Microsoft’s total revenue rose 15% to $64.7 billion in the fourth quarter, surpassing analyst expectations. The company also saw growth in its personal computing business, benefiting from stabilizing PC sales. However, revenue from its Intelligent Cloud unit, which includes Azure, missed analyst estimates, increasing 19% to $28.5 billion.
