The official launch of Microsoft 365 Copilot, the company’s new artificial intelligence service for large businesses, is still more than a week away, on Nov. 1. However, investors will be watching its quarterly report Tuesday for hints of AI’s long-term impact on the company and the broader industry.
Microsoft’s results will serve as “a major bellwether for cloud spend and especially the appetite for generative AI spend among CIOs,” writes Wedbush analyst Daniel Ives in a note to clients previewing the tech earnings week ahead.
Wall Street analysts surveyed in advanced expect Microsoft to report earnings of $2.65 per share, a 13% increase from a year earlier, on revenue of $54.5 billion, up 10% year-over-year, as reported by Yahoo Finance.
Google parent Alphabet will also report earnings Tuesday afternoon, setting up a direct comparison between two of the biggest players in this new era. Analysts expect Google’s revenue to rise 10%, as well, to $76 billion, with earnings of $1.45 per share, up 36% from the same quarter a year ago.
Microsoft and Google will kick off a big tech earnings week, with companies including Amazon and Intel reporting their financial results later in the week.
In addition to AI and the cloud, Microsoft investors and analysts will be watching for updates on the impact of the company’s $68.7 billion acquisition of Activision-Blizzard, the largest deal in its history, which was completed on Oct. 13. That was after the close of the recent quarter, but the completion of the transaction after a 21-month regulatory review could position the company to provide more details about the long-term outlook.
Beyond the latest quarter, the big question for Microsoft is how many companies will pay the premium of $30/user per month for Microsoft 365 Copilot, on top of monthly subscription plans that range from $12.50/user to $57/user per month.
“We continue to pick up signals of elevated demand (with tens of thousands of enterprise users in the Microsoft 365 Copilot Early Access Program),” wrote Goldman Sachs analyst Kash Rangan in a note to clients.
Rangan added that Microsoft’s “speed to market, strong presence across the tech stack and well-established footprint within the enterprise give us confidence that Microsoft is well positioned to drive growth on the back of these announcements and be a key leader in the Gen-AI era.”
Microsoft has accelerated its AI offerings through its tight partnership with ChatGPT maker OpenAI, but the company faces stiff competition from cloud rivals Amazon (and its new partner Anthropic), Google, and others.
“This next generation of AI will reshape every software category and every business, including our own,” Microsoft CEO Satya Nadella wrote in his annual letter to shareholders last week.
