Trends

AI leads Microsoft close to cloud dominance

AuthorBTW Editorial

Reading Time2 min

PublishedApril 25, 2024

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Headline

Context

Future quarterly reports from the US tech companies could reveal that Microsoft is catching up to cloud computing leader Amazon.com as more companies move to its services, drawn by a slew of generative AI features enabled by OpenAI’s technology. The adoption of AI will be gauged by Microsoft’s earnings on Thursday, which could also impact the movement of technology stocks as this month’s rally in the industry slows down due to concerns that interest rates in the US might remain high for longer.

Evidence

Pending intelligence enrichment.

Analysis

Wall Street analysts anticipate Microsoft, which earlier this year surpassed Apple to become the most valuable company in the world, to report that its billion-dollar investments in generative AI were drawing customers to its Azure cloud computing service. They also anticipate Microsoft to overtake Amazon in terms of market share. Visible Alpha estimates that Azure, a division of Microsoft’s Intelligent cloud unit, grew by 28.9% between January and March of this year. According to CFRA Research analyst Angelo Zino, AI services may account for as much as 8 percentage points of Azure’s growth. However, the majority of the benefits of AI are not expected to materialize until the following year; Morgan Stanley analysts project that generative AI Copilot will contribute $5 billion in revenue to Microsoft’s 2025 fiscal year, which begins in July. Also read: What is the market share of iPhone vs Android in Europe?

Key Points

Microsoft has beaten rivals Amazon and Google-parent Alphabet to the market with AI services including the Copilot, a set of genAI tools that work in Microsoft’s business apps.
Microsoft’s Azure is benefiting from a halo effect around Microsoft’s AI strategy.
Alphabet may take a long time to gain from AI.