TECH MARKET UPDATES: Indian IT giants Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Tech Mahindra are closely watching Microsoft's latest financial performance, which showed a slight increase in revenue that surpassed U.S. analysts' expectations. Microsoft's Q4 results revealed a steady operating margin, aligning with Wall Street's forecasts. The tech giant, led by Satya Nadella, hinted at potentially higher infrastructure investments in FY25 to meet the escalating demand for cloud and AI services.
Microsoft anticipates a revenue growth of 13.5% to 15.3% year-over-year (YoY) for Q1FY25. This growth is expected to be driven by a 19.2% to 20.5% YoY increase in its Intelligent Cloud segment, which includes a significant 28% to 29% YoY rise in Azure's constant currency (CC) revenue.
Nuvama Institutional Equities noted that Microsoft's Azure business has shown consistent growth acceleration for five consecutive quarters, following a period of decline over six quarters. The report highlighted that while AI has contributed 8% to Azure's growth, the overall increase in cloud services is positive for Indian IT firms. The firm anticipates a boost in cloud spending in FY25 after a slower FY24, leading to improved growth for the sector.
Microsoft's total revenue for the quarter reached $64.7 billion, marking a 16% YoY increase in constant currency terms. The Intelligent Cloud segment saw the highest growth, with a 20% YoY increase, reaching $28.5 billion, meeting the company's guidance. Azure's revenue alone grew 30% YoY in constant currency, with AI services contributing an additional 800 basis points.
The company's management noted that Azure's consumption business is expanding faster than the overall Azure segment. The number of Azure AI customers surged by 60% YoY, with Microsoft now serving over 60,000 Azure AI clients. Despite the strong demand, capacity for Azure services remains constrained.
Further, Microsoft's Productivity and Business Processes segment reported revenue of $20.3 billion, up 12% YoY in constant currency. Office consumer revenue grew 4% YoY due to ongoing momentum in Microsoft 365 subscriptions, although Office commercial licensing experienced a 7% YoY decline due to the shift towards cloud-based offerings.
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