Microsoft earnings show an 'enviable' competitive position in AI
Microsoft (MSFT) reported stronger-than-expected quarterly results driven by strength in its cloud business, Azure. RBC Capital Markets software equity analyst Rishi Jaluria joins Julie Hyman and Josh Lipton on Market Domination Overtime to discuss the results and Microsoft’s competitive position amid the artificial intelligence (AI) era. “It feels like sentiment has gone a little bit more muted on Microsoft, so expectations weren't too crazy heading into the print. We saw Azure actually beat at a time [when] people were worried about Azure missing. We actually saw AI kind of accelerate a little bit as well. But more importantly, Azure [excluding] AI, the core Azure, is actually accelerating on its own. So that's, I think, all very encouraging to see,” Jaluria tells Yahoo Finance. The analyst says, “I think they're in a really enviable position. Yes, there's a lot of [capital expenditures]. Yes, I think the jury is still out on Office Copilot… But I think all things considered, [I’m] pretty pleased with what we're seeing here.” Jaluria says that Microsoft is “providing a greater level of transparency” in regard to cloud growth compared to its competitors. He says the report may push other companies, like Oracle (ORCL), to do the same. “I hope others can follow suit because that really makes the markets work better when we just have more information.” “Microsoft is in probably the strongest position of any of the hyperscale cloud vendors out there, and now you layer in the OpenAI partnership, the fact that Microsoft is infusing AI throughout the entire stack, the fact that there's this Azure halo effect that's going on where companies are actually giving more share to Microsoft because they're so impressed with the AI roadmap and all the innovation that's happening at Microsoft. I think it honestly puts them in the strongest position out of any of the hyperscalers.” Microsoft’s year-to-date performance doesn’t seem to reflect Wall Street analysts’ bullish view of the company and its AI opportunity. Jaluria credits this discrepancy to market sentiment. “It's classic market philosophy of people get ahead of themselves, get overly excited, and then any small blip is enough to get people disappointed.” To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here. This post was written by Naomi Buchanan.
