Microsoft’s slow cloud growth signals AI payoff will take longer
- Big technology companies have been pouring billions of dollars into data centres to capitalise on the generative AI boom
Microsoft said it would spend more money this fiscal year to build out AI infrastructure even as growth slowed in its cloud business, another sign the payoff from hefty investments in the technology may take longer than Wall Street had hoped.
Shares fell 7 per cent on the spending forecast but pared losses to trade down 4 per cent after the bell on Tuesday after Microsoft said on a post-earnings call that Azure cloud growth would accelerate in the second half of fiscal 2025.
Big technology companies have been pouring billions of dollars into data centres to capitalise on the generative AI boom. Google-parent Alphabet warned last week that its capital spending would stay elevated for the rest of the year.
Microsoft said its capital spending rose 77.6 per cent to US$19 billion in its fiscal fourth quarter that ends June 30, with cloud and AI-related spending accounting for nearly all of the expenditures. For all of fiscal 2024, capital spending totalled US$55.7 billion.
Group CFO Amy Hood said the spending was necessary to support demand for AI services and the company was investing in assets that “will be monetised over 15 years and beyond.”