Tech

Microsoft set for AI-powered revenue surge as stock pulls ahead

Published

3 months ago

January 29, 2024

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Microsoft set for AI-powered revenue surge as stock pulls ahead

Microsoft (MSFT.O), opens new tab is expected to report a 15.8% jump in quarterly revenue, its best growth in nearly two years, as rising adoption of its products infused with generative AI fuels demand for its cloud services.

Thanks to its early lead in artificial intelligence, Microsoft is likely to cement its lead as the biggest company by market value this year. The software giant snagged the top spot on Friday, with a valuation of $3 trillion, toppling by a small margin Apple (AAPL.O), opens new tab, the most valuable company since 2011.

Results on Tuesday from Microsoft, which has committed to invest more than $10 billion in generative AI posterchild and ChatGPT maker OpenAI, will set the tone for expectations from AI this year, after investors poured billions of dollars into the technology in 2023.

Any boost to companies’ toplines will still be small for the next few months, analysts have said. Nevertheless, Wall Street will watch closely to see if these investments are starting to show returns.

“Gen AI has emerged as the top priority for (chief information officers) and Microsoft is uniquely well positioned, with the majority of CIOs expecting to use a Microsoft AI product in the next 12 months,” Morgan Stanley analyst Keith Weiss said in a note dated Jan. 11.

The Windows-maker over the last three months has widely rolled out its main AI tool – the $30-a-month “Copilot” for its Microsoft 365 service that can draft emails, make presentations and collate meeting highlights.

“We expect AI contribution to Azure growth to increase, with our checks pointing to strong demand for Azure AI services,” said Jefferies analyst Brent Thill in a research note.

“It’s worth highlighting that we expect the situation at OpenAI will have a minimal impact, if any, on Azure’s AI contribution in (the second quarter),” he said.

Growth in Microsoft’s cloud business is also picking up as customers buy computing power in anticipation of using its AI services. This has helped Azure win market share as it competes with Amazon.com’s (AMZN.O), opens new tab AWS and Alphabet’s (GOOGL.O), opens new tab Google Cloud.

Microsoft forecast 26% to 27% growth for Azure in the second quarter ended Dec. 31. Analysts from Visible Alpha expect Azure to grow 27.7%.

“It’s too early to be modeling revenue contribution from GenAI before 2025 for any software company not named Microsoft,” said RBC Capital Markets analyst Rishi Jaluria.

Microsoft said in October it expects its December-quarter gross margin for the cloud business to be mostly flat from a year earlier as it spends to expand its AI infrastructure to meet growing demand. Second-quarter operating expenses are expected to surge the most in five quarters, according to LSEG.

A recovery in the personal computers market is expected to lift revenue growth in the company’s Windows and devices business to the most in four years.

For its Windows-based business segment, which includes its recent acquisition of gaming firm Activision, the company forecast second-quarter sales growth of about 16% to 19%. Last week, Microsoft said it would let go of 1,900 employees at Activision Blizzard and Xbox, representing about 8% of the overall Microsoft Gaming division.

Microsoft’s shares climbed 57% last year. Along with a rally in other tech stocks, including Alphabet and Nvidia (NVDA.O), opens new tab, Microsoft helped fuel a 24% surge in the S&P 500 (.SPX), opens new tab in 2023.

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Tech

Reddit shares soar as earnings show advertising, AI licensing revenue potential

Published

4 hours ago

May 8, 2024

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Reddit shares soar as earnings show advertising, AI licensing revenue potential

Reddit soared as much as 11% in early trading on Wednesday after the social media firm floored investors with strong revenue growth and improving profitability in the first earnings since its market debut.

The company surprised Wall Street late on Tuesday with a forecast that it could post an adjusted profit in the second quarter, and its revenue outlook was also far above estimates.

The projections followed better-than-expected results for the first three months of 2024, showing that Reddit’s push to grow its advertising business and content licensing deals with AI-focused companies such as Google were paying off.

“We suspected that Reddit would come out strong out of the gates, and Reddit exceeded our bullish expectations,” Bernstein analyst Mark Shmulik said in a client note.

“Reddit appears to be reaping the benefits of a strong digital ad market, buoyed by some ‘free’ IPO marketing, alongside increased traffic courtesy of their new favorite AI partner Google.”

Several analysts have said that despite being founded in 2005, Reddit was still in the early stages of the process of generating ad revenue and should benefit in the coming quarters from expanded ad targeting and measurement tools, among others.

The company’s more than 100,000 discussion forums, or subreddits, filled with user-generated content topics ranging from history to gaming have made it an attractive partner for companies looking to train their data-hungry AI models.

At least 7 analysts raised their price target on Reddit’s stock, pushing the median view to $55, according to LSEG data. The company priced its much-awaited initial public offering at $34 in March.

Reddit remains in the early days of developing its ads business, Piper Sandler analysts said, adding that a large international user opportunity remains untapped.

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Tech

Kretinsky and Layani face off in battle for distressed IT firm Atos

Published

1 day ago

May 7, 2024

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Kretinsky and Layani face off in battle for distressed IT firm Atos

Shares of Grayscale Bitcoin Trust jumped 2.4% on Monday after the exchange-traded fund (ETF) that tracks the price of bitcoin saw its first day of inflow since January.

The move marks a major milestone for GBTC, which has seen $17.46 billion in withdrawals since it converted from a trust to an easily tradable ETF in January, due to the higher fees it charges compared with rivals.

Some of the outflows were also tied to the wave of bankruptcies in the crypto industry, as companies that collapsed in the last two years pulled money out of the fund to repay their creditors.

GBTC saw inflows of $63 million on Friday, according to investment management firm Farside Investors. It currently manages $18.08 billion in assets, according to its website.

However, its position as the biggest spot bitcoin ETF by assets under management (AUM) has come under threat from BlackRock’s iShares Bitcoin Trust, which manages $16.91 billion, according to its website.

Grayscale said in March that it would seek approval from the Securities and Exchange Commission to spin off a portion of GBTC’s assets into a new, lower-fee Bitcoin Mini Trust. The company has yet to decide on the fees for the Mini Trust.

Spot bitcoin ETFs, which were approved by the SEC in January following a decade of rejection, provide investors with bitcoin exposure without the need to directly hold the cryptocurrency.

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Tech

China to build 100-mile-long hyperloop train line by 2035

Published

1 day ago

May 7, 2024

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China to build 100-mile-long hyperloop train line by 2035

China’s top engineering and rail design experts have exciting news: they’re planning to build the country’s very first hyperloop train line!

This futuristic project will connect two bustling cities, Shanghai and Hangzhou, spanning a distance of 150km (about 93 miles).

What makes this project so special? Well, it’s all about speed! The hyperloop train will travel inside a special vacuum tunnel, allowing it to reach mind-blowing speeds of up to 1,000km/h (that’s about 621mph!).

Before choosing the Shanghai-Hangzhou route, the experts carefully evaluated several options.

They considered factors like economic potential, population density, and existing transport infrastructure. In the end, they decided that connecting Shanghai and Hangzhou would bring the most benefits to the region.

This project is a big deal for China, and it’s being led by some of the country’s top engineers and scientists.

They’re excited about the potential for this hyperloop train to revolutionize transportation and boost economic growth in the area.

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