• Source:Reuters
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Microsoft is anticipated to release its lowest quarterly sales increase in a year. Meanwhile, investors are waiting for indications of demand for AI as concerns over the sluggish return on significant investments in the technology mount.

Due in part to its investment in OpenAI, the company that owns ChatGPT, the software behemoth is seen as the leader in the competition to profit from generative AI. However, new reports indicate that its main products—such as the $30/month Copilot assistant for businesses—are not being adopted very quickly.

According to Morgan Stanley analysts, there is "a wall of worry" surrounding Microsoft's earnings because of "ramping capital expenditures, margin compression, lack of evidence on AI returns, and messiness post a financial resegmentation."

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These are the first results since the company changed how it reported its operations in August to better reflect how it is run. However, estimating the previous quarter's performance has become more difficult as a result of that move.

Since its most recent results announcement in late July, the company's shares have increased by only over 1%, significantly underperforming the benchmark S&P 500. However, the stock has increased by almost 14% this year.

According to seven analysts surveyed by Visible Alpha, Microsoft's Azure cloud computing division probably expanded by 33% during the company's fiscal first quarter, which concluded on September 30. That is slightly less than the fourth quarter, but it is still in line with the company's forecasts.

The whole business has slowed, even though AI's contribution to Azure has increased—it accounted for 11 percentage points of growth in the fourth quarter. In July, Microsoft stated its expectation that Azure's growth would accelerate in the second half of the fiscal year.

Analysts surveyed by LSEG predict that Microsoft's overall sales increased 14.1% to $64.51 billion in the September quarter. Like its competitors in the AI space, Microsoft has cautioned that the technology will continue to be expensive. Visible Alpha estimates that capital investment increased 71.7% to $19.23 billion in the September quarter.

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However, some analysts think that Microsoft's recent actions, such as using Copilot to develop autonomous AI bots that can perform repetitive tasks without human assistance, could increase the assistant's uptake.

According to Ben Reitzes, an analyst at Melius Research, "Most investors seem sceptical of 365 Copilot adoption since they aren't using it personally very much." He added that the assistant "boasts an increasingly improving customer list" and that "it seems Copilot data points are getting modestly better."

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