Microsoft (MSFT) -) shares moved higher in pre-market trading ahead of the tech giant's first quarter earnings after the closing bell.
Microsoft, which effectively fired the starting gun on this year's AI frenzy with a $10 billion investment in ChatGPT creator OpenAI, is likely to provide further details on how the large-language AI model is helping it Bing search engine take share from Google parent Alphabet (GOOGL) -) while boosting revenues from global advertisers in the $500 billion digital advertising market.
Analysts also expect Microsoft to see solid revenue from growth from its Intelligent Cloud division, which houses it flagship Azure offering, as companies around the world scramble to for more data space, as well as utility, to harness the power of AI modelling.
Microsoft's own first quarter outlook, which it made public in July, called for improved margins in Intelligent Cloud, with revenues of between $23.3 billion to $23.6 billion.
It also forecast revenue growth of between $18 billion and $18.3 billion for Productivity and Business Processes and 16% revenue growth for Office Commercial.
Microsoft's overall revenues for the three months ending in September, its fiscal first quarter, are forecast to rise 8.7% from last year to $54.5 billion, with earnings up 12.8% to $2.65 per share, according to Refinitiv data.
"Microsoft's results/outlook on Tuesday after the bell a major bellwether for cloud spend and especially the appetite for generative AI spend among CIOs," said Wedbush analyst Dan Ives, who carries an 'outperform' rating with a $400 price target on Microsoft stock.
"For Redmond all eyes will be around the company's all-important Azure revenue growth that we expect will exceed the company's constant currency guidance of 25%-26% based on our positive checks in the field," he added.
Microsoft shares were marked 0.6% higher in early Tuesday trading to change hands at $331.05 each, a move that would extend the stock's six-month gain to around 18%.
The group is also likely to detail the impact on its 2024 earnings from the $69 billion takeover of 'Call of Duty' videogame maker Activision Blizzard, which closed earlier this month following a series of legal challenges from competition authorities in Europe and the United States.
Competition issues loom large for the world's second most-valuable tech company, however, and Microsoft agreed only two months ago to unbundle its Teams app from its broader Office products suite after the European Commission last month launched a probe into the impact of tying the popular chat and video app to the market-leading business suite.
Microsoft rival Salesforce CRM earlier this year filed a complaint with European officials, arguing that including Teams as a free offering in Office 365 was harming the company's ability to expand Slack, the business messaging app it purchased in 2020.
Over the past 10 years Microsoft has paid more than $2.4 billion in fines to the European Commission linked to the bundling of its products, which authorities have said stifles fair competition.
Ofcom, Britain's media watchdog, asked the country's Competition and Markets Authority earlier this month to investigate allegations that the pair's business tactics make it more difficult for British firms to user multiple cloud providers or switch from one of the two main providers to a rivals such as IBM (IBM) -) and Oracle (ORCL) -) in a market the regulator estimates is worth around $9 billion.
An initial response is expected in a few months, with the probe likely to be completed by April of 2025.
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