Microsoft has spent billions of dollars on data centers, chips, talent and other infrastructure needed to build its artificial intelligence empire, and plans to spend billions more. So far, this strategy seems to be working. Investors pushed the company's stock up 5.5% in after-hours trading after the company's quarterly earnings report on Thursday, and Wedbush's Daniel Ives named Microsoft the “number one AI draft pick” in a report on Friday. Analysts also praised the numbers. But there are still obstacles standing in the way of Microsoft's AI domination.
When asked by an analyst on Thursday's earnings call about when revenue from AI projects will catch up with the billions of dollars Microsoft is spending on the technology, CEO Satya Nadella said: He pointed out that corporate customers need a culture change.
Deploying AI tools like Microsoft's Copilot or Azure AI across your enterprise often means upending the way your business has operated for years. “At the end of the day, companies need to put processes in place, simplify processes, automate processes, and apply these solutions,” Nadella said. “This will not only require technology, but will actually require a huge effort by companies to make a cultural shift in how they implement technology.”
Difficult but necessary cultural change is challenging even Microsoft's own executives and employees. “We are also taking our own medicine to apply this to all processes,” he added.
Analysts believe Microsoft is one of the best-positioned companies in the AI space due to its cloud computing business and partnership with ChatGPT maker OpenAI to serve customers who use AI. But for that investment to pay off, Microsoft needs ordinary employees to actually use its technology, which puts it at odds with human intransigence.
Long-held work habits are hard to change, but how employees learned to work from home during COVID-19 is a promising sign for AI technology adoption, says Microsoft 365 general manager. said Colette Stallbaumer. luck last year. The pandemic and subsequent stay-at-home orders required employees to quickly adopt new technologies, such as Zoom video conferencing, to do their jobs. As a result, she says, people have become accustomed to changes in the workplace.
To learn how to make its technology more engaging, Microsoft is studying how people form new work habits, she said. She said that as of September, the company was planning to designate employees within customer companies as “Copilot Champions,” who could advocate for use of Microsoft's virtual assistant.
Microsoft was at the forefront of such a major workplace transformation in the 1990s, when personal computers became popular, Nadella said during an earnings call. Business culture and processes take time to change, but that change is happening faster than ever before. Workplaces are adopting Copilot “faster than any suite we've ever sold,” he said.
The earnings report, which covers the first three months of 2024, focused on the performance of Microsoft's cloud computing platform Azure. Last quarter, Azure's business grew 30% year over year, 6 percentage points of which came directly from customer demand for his AI products. Growth continued to exceed expectations this quarter. Azure's revenue increased by 31% compared to the same period last year, and 7% of that was said to be due to AI.
Microsoft's companywide sales increased 17% from the same period last year to $61.9 billion. Profits rose 20% from the previous year to $21.9 billion.
In intraday trading on Friday, the stock was valued at $410 per share, up 2.8% from Thursday's closing price and down slightly from Thursday's after-hours trading.
