Microsoft said that it would increase its spending on developing its artificial intelligence (AI) infrastructure despite a slowed growth in its cloud business.
Reuters reported that the company's shares fell by 7% on the spending forecast, but made it slightly better by minimizing its downturn to 4% by the end of trading Tuesday (July 30). Microsoft said in a post-earnings call that its Azure cloud growth would accelerate in the latter half of its 2025 fiscal year.
According to LSEG findings reported by CNBC, the company's earnings per share and revenue was slightly higher than expected. It was reported that its shares were valued at $2.95 each (compared to the expected $2.93), and its revenue was slightly better at $64.73 billion, higher than LSEG's $64.39 billion prediction.
Microsoft is but one of many big tech companies investing heavily on AI, with its capital spending rose 77.6% to $19 billion in its fiscal fourth quarter which ended June 30, most of which was spent on its AI and cloud businesses.
It is understood that the company's total capital spending was at $55.7 billion.
Microsoft CEO Satya Nadella added that Azure AI was now used by over 60,000 customers, which was a near 60% increase year-on-year.
Microsoft's Increased AI Spending 'Necessary'
Microsoft Group CFO Amy Hood explained that the company needed to spend its capital money to support demand for its AI services, saying that it was investing in assets that it hoped would be "monetized over 15 years and beyond."
However, this did not go very well with Microsoft's investors as they have been expecting significant development from the company's AI initiatives and from Azure, yet found none.
According to Synovus Trust senior portfolio manager Daniel Morgan, not all investors and shareholders have a lot of patience, which meant that they wished to see results of their investments as soon as possible.
Despite this, Microsoft predicted that it would grow 28% to 29% on a constant currency basis in the July to September quarter, compared with the 29.7% estimates predicted by Visible Alpha.
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