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Microsoft Corp.’s Azure cloud-computing service has reported a slowdown in its quarterly growth, which has left some investors concerned about the returns on the company’s substantial investments in artificial intelligence (AI). In the fiscal fourth quarter, Azure’s revenue grew by 29 percent, a deceleration compared to the 31 percent increase reported in the previous quarter. This slower growth rate comes despite a slight improvement in the contribution of AI to Azure’s performance, which rose to 8 percentage points in the recent period from 7 percentage points earlier.
Doug Clinton, a managing partner at Deepwater Asset Management, expressed disappointment in the growth figures, noting that the cloud services sector needed to perform slightly better to meet expectations. On Bloomberg Television, he highlighted that the growth rate was below what many had anticipated. However, Barclays analyst Raimo Lenschow viewed the increased contribution from AI as a positive sign, indicating continued business momentum in this rapidly evolving field.
Under CEO Satya Nadella, Microsoft has been aggressively integrating AI technology into its product offerings, leveraging its partnership with OpenAI. This includes the introduction of digital assistants known as Copilots, which are designed to enhance productivity by summarizing documents, generating code, drafting emails, and creating other content. This integration reflects Microsoft’s broader strategy to embed AI deeply into its suite of tools and services.
In addition to AI advancements, Microsoft is actively marketing Azure cloud subscriptions that feature OpenAI’s technology, aiming to capitalize on the growing demand for sophisticated AI solutions. This move aligns with the company’s broader effort to maintain Azure’s competitive edge in a crowded cloud services market.
Microsoft’s commitment to expanding its cloud infrastructure is part of a larger trend among tech giants. Alongside competitors like Amazon and Google, Microsoft is investing heavily in building new data centers. These facilities are crucial for supporting both general cloud computing needs and the specific requirements of AI applications, which are known for their substantial power and processing demands.
Despite the overall slowdown in Azure’s growth, the company’s strategic focus on AI and cloud services remains a critical component of its long-term vision. The investments in AI and infrastructure are expected to drive future growth and solidify Microsoft’s position in the cloud computing landscape. As the industry continues to evolve, Microsoft’s ability to adapt and capitalize on emerging technologies will be key to sustaining its competitive advantage and achieving robust growth.
