Microsoft (MSFT) is set to report its fourth quarter earnings after the market close on Tuesday. Ali Mogharabi, WestEnd Capital Management’s senior equity analyst, joins Morning Brief to discuss his expectations for the results and how he anticipates AI will impact them.
Mogharabi notes that AI is still in “the early stages,” and he expects continued investment in the technology from Microsoft. He references other tech companies like Alphabet (GOOG, GOOGL), which saw 29% growth in their cloud businesses, describing this as “good for Microsoft.” He suggests this trend indicates that “the cloud providers, including Microsoft of course, will probably see demand for their cloud go up thanks to AI,” adding that he’s “pretty optimistic” about Microsoft’s cloud and AI businesses in the upcoming report.
“I’m sure you remember last week, Sundar Pichai, CEO of Alphabet, he actually said there may be overinvestments on that front [AI], but that’s actually much better than underinvesting and falling behind,'” Mogharabi tells Yahoo Finance. “Microsoft probably has the same type of strategy moving forward,” he adds.
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source
date: 2024-07-30 15:43:54
duration: 00:04:15
author: UCEAZeUIeJs0IjQiqTCdVSIg
Here’s a summary of the transcript:
Can Microsoft Deliver on AI Expectations?
In a recent interview, Ali Murabi, Senior Equity Analyst at West End Capital Management, discussed Microsoft’s potential to deliver on its AI expectations. He believes the company will continue to make significant investments in AI, citing the “early stages” of the AI cycle and a “still growing” pace of capital expenditure (capex). Murabi thinks Microsoft’s cloud business, in particular, will benefit from increased demand for AI-related services, as seen in Google’s Q4 results.
Microsoft’s guidance will be crucial in determining the company’s progress in the AI cycle. Last week, Sundar Pichai, CEO of Alphabet, suggested there may be overinvestment in AI, but this is a better scenario than underinvestment. Murabi believes Microsoft is in the “fourth or fifth inning” of the AI cycle, with a focus on expanding data centers and investing in chips.
He notes that while some may worry that the earnings growth narrative has gotten ahead of itself, he doesn’t think this is the case yet. Google’s strong Q4 results, driven by AI, support his view. Microsoft’s upcoming earnings this season, as well as those of Meta, Apple, and Amazon, will also likely support the narrative.
Overall, Murabi is optimistic about Microsoft’s prospects in the AI space, citing the company’s investments in infrastructure and the potential for increased demand for cloud services driven by AI.
