Microsoft cuts revenue expectations from cloud

NEW YORK

Microsoft has said it would rake in less revenue than expected from its cloud computing unit, which could risk breaking investor confidence that it can reap quick benefits from investments in AI.

In an update to investors, the tech giant said that it now expects intelligent cloud revenue to be between $23.8 billion and $24.1 billion in the current quarter that runs from July through September.

This was compared with its prior expectations of $28.6 billion and $28.9 billion.

The Intelligent Cloud business is one of Microsoft's fastest growing and most profitable segments, generating significant revenue from the rapid adoption of Azure and other cloud services.

It competes primarily with cloud platforms like Amazon Web Services, Google Cloud, and IBM Cloud which are all offering generative AI services to attract customers and juice revenues.

Microsoft is among the major contenders in the race to build out artificial intelligence systems, pouring billions of dollars into the technology in the hope it will pay off.

The company founded by Bill Gates is keen to monetize generative AI, having moved the fastest to implement it across all its products, and investing $13 billion into OpenAI, the start-up stalwart behind ChatGPT.

After the revenue update, shares in Microsoft were only moving slightly lower in after-hours trading.

Microsoft last month reported strong quarterly earnings but saw its shares slip on figures showing its crucial cloud computing unit did not grow as strongly as expected.

Money brought in from cloud computing has driven blockbuster earnings quarter after quarter, and a hint that stellar growth may be slowing was enough to give investors pause.