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Azure's Cloud Magic to Spark Microsoft's Q2 Growth
Microsoft is witnessing robust demand for its cloud infrastructure monitoring, web-based application performance management and human capital management solutions. This demand is fueled by the increasing migration of workloads to the cloud.
During the fiscal first quarter, Azure and other cloud services revenues grew 33% (up 34% at cc), including roughly 12 points from AI services where demand remained higher than available capacity.
For the fiscal second quarter, Microsoft expects Azure revenue growth at cc between 31% and 32%, with steady contributions from all Azure AI services.
Azure's increased availability in more than 60 announced regions globally is expected to have strengthened the company’s competitive position in the cloud computing market, dominated by Amazon’s (AMZN - Free Report) cloud division, Amazon Web Services and Alphabet (GOOGL - Free Report) -owned Google Cloud.
Despite these cutting-edge AI moves, shares of Microsoft have gained 9.7% in the past year compared with the broader Zacks Computer and Technology sector’s 28% growth amid intensifying competition from Amazon and Alphabet as they are all making aggressive moves to expand their generative AI capabilities. Shares of AMZN and GOOGL have returned 48.9% and 31.8%, respectively.
Azure AI Gives MSFT Competitive Edge in Generative AI Market
MSFT’s AI innovation continues to build on its strategic partnership with OpenAI. Azure OpenAI usage has more than doubled over the past six months, as both digital natives like Grammarly and Harvey, as well as established enterprises like Bajaj Finance, Hitachi, KT and LG, move apps from test to production.
GE Aerospace, for example, used Azure OpenAI to build a new digital assistant for all 52,000 of its employees. In just three months, it has been used to conduct over 500,000 internal queries and process more than 200,000 documents.
In the fiscal first quarter, Microsoft added support for OpenAI’s newest model family o1. MSFT is also bringing industry-specific models to Azure AI, including a collection of best-in-class multimodal models for medical imaging.
Microsoft has brought generative AI to Power Platform to help customers use the low-code/no-code tools to cut costs and development time. As of Sept. 30, nearly 600,000 organizations have used AI-powered capabilities in Power Platform, up 4X year over year.
Growing Adoption of MSFT’s Copilot to Aid Q2 Prospects
Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow and work artifacts. Nearly 70% of the Fortune 500 now use Microsoft 365 Copilot, and customers continue to adopt it at a faster rate than any other new Microsoft 365 suite.
In the fiscal first quarter, monthly active users of Copilot across CRM and ERP portfolios increased more than 60% quarter over quarter. This trend is likely to have continued in the quarter under review.
The new class of Copilot+ PCs is winning new customers. AMD, Intel and Qualcomm now all support Copilot+ PCs.
In the quarter under review, Microsoft announced the limited availability of Copilot Vision, a tool with the capability to understand and respond to queries about sites visited on Microsoft Edge, for U.S. customers.
Key AI Announcements in Q2
In the quarter under review, Microsoft announced a joint venture with Accenture (ACN - Free Report) and Avanade to launch a copilot business transformation process, driven by Microsoft, to develop capabilities and solutions to aid organizations in reinventing practices using generative and agentic AI.
Microsoft announced its partnership with Rezolve AI to enable retailers to enhance digital engagement by using advanced capabilities. Microsoft will also provide marketing, sales and technical assistance to drive Rezolve AI’s market reach over a five-year period.
MSFT announced a five-year, multibillion-dollar strategic alliance with KT Corporation to develop AI innovations and transformations for more than 650,000 businesses and 17 million consumers across Korea.
Microsoft announced an investment of €4.3 billion over two years in Italy to expand its AI data center and hyperscale cloud infrastructure.
Microsoft currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
MSFT Q2 Earnings Preview: Azure Cloud Innovation Takes Center Stage
Microsoft’s (MSFT - Free Report) second-quarter fiscal 2025 results, scheduled to be reported on Jan. 29, are likely to be driven by steady growth in its cloud platform, Azure. (Read Now: Microsoft Stock Before Q2 Earnings: A Smart Buy or Risky Investment?)
For the fiscal second quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) between $25.55 billion and $25.85 billion.
Our model estimate for this segment is pegged at $25.69 billion, indicating growth of 19.4% from the figure reported in the year-ago quarter.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Azure's Cloud Magic to Spark Microsoft's Q2 Growth
Microsoft is witnessing robust demand for its cloud infrastructure monitoring, web-based application performance management and human capital management solutions. This demand is fueled by the increasing migration of workloads to the cloud.
During the fiscal first quarter, Azure and other cloud services revenues grew 33% (up 34% at cc), including roughly 12 points from AI services where demand remained higher than available capacity.
For the fiscal second quarter, Microsoft expects Azure revenue growth at cc between 31% and 32%, with steady contributions from all Azure AI services.
Azure's increased availability in more than 60 announced regions globally is expected to have strengthened the company’s competitive position in the cloud computing market, dominated by Amazon’s (AMZN - Free Report) cloud division, Amazon Web Services and Alphabet (GOOGL - Free Report) -owned Google Cloud.
Despite these cutting-edge AI moves, shares of Microsoft have gained 9.7% in the past year compared with the broader Zacks Computer and Technology sector’s 28% growth amid intensifying competition from Amazon and Alphabet as they are all making aggressive moves to expand their generative AI capabilities. Shares of AMZN and GOOGL have returned 48.9% and 31.8%, respectively.
Azure AI Gives MSFT Competitive Edge in Generative AI Market
MSFT’s AI innovation continues to build on its strategic partnership with OpenAI. Azure OpenAI usage has more than doubled over the past six months, as both digital natives like Grammarly and Harvey, as well as established enterprises like Bajaj Finance, Hitachi, KT and LG, move apps from test to production.
GE Aerospace, for example, used Azure OpenAI to build a new digital assistant for all 52,000 of its employees. In just three months, it has been used to conduct over 500,000 internal queries and process more than 200,000 documents.
In the fiscal first quarter, Microsoft added support for OpenAI’s newest model family o1. MSFT is also bringing industry-specific models to Azure AI, including a collection of best-in-class multimodal models for medical imaging.
Microsoft has brought generative AI to Power Platform to help customers use the low-code/no-code tools to cut costs and development time. As of Sept. 30, nearly 600,000 organizations have used AI-powered capabilities in Power Platform, up 4X year over year.
Growing Adoption of MSFT’s Copilot to Aid Q2 Prospects
Copilot for Microsoft 365 is becoming a daily habit for knowledge workers, as it transforms work, workflow and work artifacts. Nearly 70% of the Fortune 500 now use Microsoft 365 Copilot, and customers continue to adopt it at a faster rate than any other new Microsoft 365 suite.
In the fiscal first quarter, monthly active users of Copilot across CRM and ERP portfolios increased more than 60% quarter over quarter. This trend is likely to have continued in the quarter under review.
The new class of Copilot+ PCs is winning new customers. AMD, Intel and Qualcomm now all support Copilot+ PCs.
In the quarter under review, Microsoft announced the limited availability of Copilot Vision, a tool with the capability to understand and respond to queries about sites visited on Microsoft Edge, for U.S. customers.
Key AI Announcements in Q2
In the quarter under review, Microsoft announced a joint venture with Accenture (ACN - Free Report) and Avanade to launch a copilot business transformation process, driven by Microsoft, to develop capabilities and solutions to aid organizations in reinventing practices using generative and agentic AI.
Microsoft announced its partnership with Rezolve AI to enable retailers to enhance digital engagement by using advanced capabilities. Microsoft will also provide marketing, sales and technical assistance to drive Rezolve AI’s market reach over a five-year period.
MSFT announced a five-year, multibillion-dollar strategic alliance with KT Corporation to develop AI innovations and transformations for more than 650,000 businesses and 17 million consumers across Korea.
Microsoft announced an investment of €4.3 billion over two years in Italy to expand its AI data center and hyperscale cloud infrastructure.
Microsoft currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.