Microsoft to report Q3 revenue as Wall Street looks for AI growth

Microsoft (MSFT) will report its fiscal third quarter earnings after the bell on Thursday, as Wall Street continues to look for signs that the AI explosion is more than just hype. In its prior quarter, Microsoft announced that its AI capabilities contributed 6 percentage points of growth to the company’s Azure revenue, up from 3% in the previous period, and analysts are looking for more.

Shares of Microsoft are up more than 10% year to date, behind rivals such as Google parent Alphabet (GOOG, GOOGL) and Amazon (AMZN), which are up 15% and 22%, respectively. Over the last 12 months, Microsoft’s shares have climbed 32%, though Amazon has jumped 67%, while Google is up 47%.

The three companies are battling it out to see which can offer the most comprehensive AI solutions to enterprise customers and customers, whether that means making heavy investments

in third-party firms like OpenAI and Anthropic or reorganizing their internal teams like Google. For the quarter, Wall Street is calling for Microsoft to report earnings per share of $2.83 on revenue of $60.88 billion, according to analysts’ estimates compiled by Bloomberg. In the same period last year, Microsoft reported EPS of $2.45 on revenue of $52.86 billion.

Analysts are looking for Microsoft to announce overall commercial cloud revenue of $33.93 billion in the quarter, a 19% year-over-year increase. In terms of business segments, Wall Street anticipates Microsoft will report Productivity and Business Processes revenue of $19.54 billion, Intelligent cloud revenue of $26.25 billion, and More Personal Computing revenue of $15.07 billion.

Microsoft’s AI ambitions got a healthy boost on Tuesday when it announced that Coca-Cola (KO) signed a five-year, $1.1 billion agreement to use the software giant’s Azure cloud services and AI technology.

“Through our long-term partnership, we have made significant progress to accelerate system-wide AI transformation across The Coca-Cola Company and its network of independent bottlers worldwide,” Microsoft executive vice president and chief commercial officer Judson Althoff said in a statement.

Microsoft has unleashed a torrent of new AI features and services for its enterprise and productivity apps and consumer platforms ever since it first debuted its revamped version of Bing and its AI chatbot in February 2023.

In March, Microsoft announced that it hired DeepMind AI and Inflection AI co-founder Mustafa Suleyman, fellow Inflection AI co-founder Karén Simonyan, as well as a number of the company’s staff members. Suleyman is taking up a new post at Microsoft as CEO of the Microsoft AI division.

In February, Microsoft announced a multiyear partnership with French AI startup Mistral that would allow Microsoft to offer the company’s models on its Azure platform.