Why are investors unhappy with Microsoft AI even after decent figures?

Despite positive news about cloud computing growth and progress in artificial intelligence integration, Microsoft’s stock price fell after its latest earnings report. While acknowledging advances in AI, investors sought more concrete information about its financial impact.

Here is Microsoft’s FY23 Q2 earnings.

Microsoft’s Azure cloud platform grew strongly, increasing revenue by 30%. AI contributed 6% points to this growth, but analysts like Angelo Zino wanted “quantified” information about AI’s future financial contribution. Surprisingly, the gaming sector did more business for Microsoft than Windows.

Here is why investors aren’t happy:

• Lack of concrete AI impact: While AI contributed to growth, the specific financial impact remains unclear. Investors want quantifiable data on how much AI will boost future revenue, not just general statements about progress.
• Different AI strategy than competitors: Unlike Nvidia’s explosive AI processor sales, Microsoft emphasizes gradual integration, which doesn’t satisfy investors seeking immediate financial returns. This slower burn approach creates uncertainty about the payoff.
• Lack of detailed subscription numbers: Though Microsoft reported “much faster” adoption of its new AI assistant, Copilot, they haven’t disclosed specific subscription figures. This lack of data makes it difficult to assess this AI product’s true impact and potential.

While Microsoft demonstrates progress in AI integration and cloud computing remains strong, the precise financial impact of AI remains unclear. Investors seeking immediate, quantifiable returns may require further information and a more concrete roadmap for how AI will drive future revenue growth.

More here.