Microsoft’s Cloud, Desktop Woes May Overshadow AI Hype

Microsoft will report its earnings today, amid a dramatic shift in perceptions of the company due to its multi-billion dollar investment in OpenAI, developers of the market-leading ChatGPT AI chatbot. However, Microsoft also has sluggish growth in its cloud business and steep declines in desktop PC purchases to contend with.

Microsoft has been on an AI tear recently, integrating OpenAI technology into its search engine, web browser, office, and cybersecurity software. The company is widely believed to be ahead of its competitors, including Google, as tech giants race to dominate the rapidly-growing field of AI.

But Microsoft’s profits do not primarily come from AI, and older parts of the business may overshadow the hype.

Via Yahoo! Finance:

And while Microsoft’s stock has seemingly benefited from both the AI hype and overall market rebound after a rough 2022, the company’s main growth driver continues to be its cloud computing efforts in its Azure unit.

But that growth has slowed markedly over the last year. In Q2 2022, Microsoft reported year-over-year server products and cloud services revenue growth touched 29%. But as of Q2 2023, revenue growth fell to 20% when including the impact of currency fluctuations.

Microsoft also has to deal with a sharp drop in purchases of Microsoft-powered desktop PCs. As Breitbart News reported this month:

The first quarter of 2023 saw double-digit annual declines for PC manufacturers as a whole, according to Canalys. The end of the pandemic-driven surge in demand for remote work and study, as well as general economic uncertainty, have all been blamed for the decline in demand.

Q1 2023 shipments were “noticeably lower” than pre-pandemic levels, according to IDC analyst Linn Huang. According to Dutt, factors like increases in interest rates in the US and Europe have also lowered demand.

Microsoft will report its earnings after the bell today.

Allum Bokhari is the senior technology correspondent at Breitbart News. He is the author of #DELETED: Big Tech’s Battle to Erase the Trump Movement and Steal The Election.