Dec 3 (Reuters) – Multiple units at Microsoft (MSFT) have lowered sales growth targets for certain artificial intelligence products after many sales staff missed targets for the fiscal year that ended in June, The Information reported on Wednesday.
The report, citing two Azure cloud sales representatives, said it is unusual for Microsoft to reduce quotas for specific products. The division is a major beneficiary of Microsoft’s AI push, so it’s receiving attention from investors.
The ChatGPT maker’s early bet on OpenAI sent the stock of one of the biggest winners of the AI boom down nearly 3%, but it pared losses after CNBC reported, citing Microsoft, that it was not lowering its revenue targets. Last time the stock price fell 1.5%.
Microsoft did not respond to Reuters’ request for comment. Reuters could not independently verify The Information’s reporting.
Investors are concerned that soaring valuations have turned into a bubble, and the company’s lower sales growth targets for its AI products are likely to fuel fears about the technology’s real-world adoption. An MIT study conducted earlier this year found that only about 5% of AI projects progress beyond the pilot stage.
The Carlyle Group began using Copilot Studio last year to automate tasks such as meeting summaries and financial models, but cut spending on the product after warning Microsoft that the software was having trouble reliably retrieving data from other applications, according to intelligence reports.
DA Davidson analyst Gil Luria said the report showed the industry was in the early stages of AI adoption. “That doesn’t mean there’s no promise that AI products can help companies improve productivity. It just means it might be harder than they think.”
US tech giants are under pressure from investors to prove that their massive investments in AI infrastructure are paying dividends.
Microsoft in October reported record capital spending of about $35 billion in its fiscal first quarter and warned that spending would rise this year. All told, U.S. tech giants are expected to spend about $400 billion on AI this year.
The companies argue that the spending is necessary to overcome supply constraints that are hampering their ability to capitalize on AI demand.
Microsoft predicts the AI capability shortage will continue at least until June 2026, when the current fiscal year ends.
The spending has so far paid off for Satya Nadella’s company, with revenue from its Azure cloud computing unit increasing 40% in the July-September period, beating expectations. Fiscal second quarter estimates also exceeded expectations.
