july 30,2024

Microsoft Corporation (NASDAQ: MSFT) reported its Q4 2024 earnings on July 30, 2024, showcasing strong performance across its key segments, with results that met or exceeded expectations.

Key Financial Metrics:

• Q4 2024 Revenue: $64.7 billion (Estimate: $63.9 billion)
• Q4 2024 EPS: $2.95 (Estimate: $2.85)

Segment Performance

1. Productivity and Business Processes:
   • Revenue: $20.3 billion (Growth: 11%)
   • Key Drivers: Growth was driven by Office 365 commercial revenue, which increased 13%, and LinkedIn revenue, which grew 10%.
2. Intelligent Cloud:
   • Revenue: $28.5 billion (Growth: 19%)
   • Key Drivers: Azure and other cloud services revenue grew 29%, driven by strong demand for AI services. Azure’s growth included 8 points from AI services.
3. More Personal Computing:
   • Revenue: $15.9 billion (Growth: 14%)
   • Key Drivers: Windows commercial products and cloud services revenue increased 11%, while search and news advertising revenue grew 19%.

Comparison with Expectations

• Overall Revenue: Microsoft reported $64.7 billion, exceeding the expected $63.9 billion.
• EPS: The reported EPS of $2.95 surpassed the expected $2.85.
• Segment Performance: Most segments performed in line with or above expectations, particularly the Intelligent Cloud segment, which met expectations with a 19% growth.

Segment Outlook

1. Productivity and Business Processes:
   • Expected Revenue Growth: 10% to 11% in constant currency
   • Projected Revenue: $20.3 billion to $20.6 billion
   • Key Drivers: Growth will be driven by Office 365, with an expected revenue growth of approximately 14% in constant currency.
2. Intelligent Cloud:
   • Expected Revenue Growth: 18% to 20% in constant currency
   • Projected Revenue: $28.6 billion to $28.9 billion
   • Azure Growth: Expected revenue growth of 28% to 29% in constant currency, driven by consumption trends and AI demand.
3. More Personal Computing:
   • Expected Revenue Growth: 9% to 12% in constant currency
   • Projected Revenue: $14.9 billion to $15.3 billion
   • Key Drivers: Windows commercial products and cloud services are expected to drive mid-single-digit growth.

Capital Expenditures (CapEx) Insights

• Total CapEx: For FY2025, Microsoft expects CapEx to be higher than FY2024, with a significant portion allocated to cloud and AI infrastructure.
• Breakdown: Approximately half of the CapEx will be for infrastructure needs (data centers), while the other half will be for servers (CPUs and GPUs) to meet demand signals.
• Long-Term Investments: The investments in land and data centers are viewed as long-term assets that will support monetization over the next 15 years and beyond.

Implications for the Chip Sector

Microsoft’s increased CapEx, particularly for servers and AI infrastructure, indicates strong demand for semiconductor components, especially GPUs and CPUs. As Microsoft expands its Azure services and AI capabilities, the demand for advanced chips from suppliers like NVIDIA and AMD is likely to increase. This trend could lead to further investments in semiconductor manufacturing and innovation, benefiting the broader chip sector.

Conclusion

Microsoft’s Q4 2024 earnings report highlights strong performance across its segments, with specific growth expectations outlined by CFO Amy Hood. The company’s focus on capital expenditures for cloud and AI infrastructure signals significant opportunities for the semiconductor industry as demand for advanced chips continues to rise.