Microsoft faces a critical moment as it prepares to release its fiscal Q3 earnings on Wednesday, following a significant 10% stock decline that erased $357 billion in market capitalization. Analysts anticipate a revenue of approximately $81.4 billion, reflecting a 16% increase year-over-year, and earnings of $4.06 per share, a 17% rise from the previous year.
Despite impressive revenue figures, investors are concerned about the company’s $37.5 billion in quarterly capital expenditures and a reliance on OpenAI for future AI revenue growth. In the previous quarter, Azure’s growth rate was expected to be between 37% and 38% in constant currency, a slight dip from 38% in Q2. This slowdown raised eyebrows, as the Azure performance had been a major factor in the stock's drop.
Microsoft’s CFO, Amy Hood, noted that if all GPUs had been allocated to Azure, growth could have exceeded 40%. The company's strategy of distributing resources between Azure and various internal projects, including Copilot, highlights the complexity of its growth narrative. In an effort to regain investor confidence, Microsoft has also initiated voluntary retirement offers for thousands to streamline operations while continuing substantial investments in AI infrastructure.