Microsoft Q4 - solid revenue and profit bea

Microsoft had results out on Wednesday last week, and the market was slightly underwhelmed. Despite a solid revenue and profit beat, their forecast for the Azure cloud-hosting business unit in 2025 was a little subdued.

CFO Amy Hood (pictured here) explained that Microsoft doesn't have enough data centre capacity to meet customer demand for its generative AI and cloud services. OpenAI, which provides the models that underpin those services, has more work than Azure can handle. That's why it's trailing the growth rates of their main competitor, Amazon (AWS).

We are long term investors in this great business, so we are not deterred. Microsoft is in a league of its own in office software for business users, and its Windows server division is rock solid. Their gaming and devices unit is also doing well.

To fix the Azure issue, Microsoft will ramp up capital spending even further in the months ahead. CEO Satya Nadella believes AI is a massive, generational tech shift, similar to the personal computer or the internet. That means the risk is investing too little, not too much.

The Microsoft share price is lower now than it was in July, but we think that next year will be better.