2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors In Q2 2024: 279
Gotham Asset Management’s Q2 2024 Stake: $95.3 million
Microsoft Corporation (NASDAQ:MSFT) is the mega cap technology giant that is one of the biggest players in the cloud computing industry as well as personal computing. Microsoft Corporation (NASDAQ:MSFT)’s Windows powers up most of the world’s computers, while Azure is believed to control 26% of the global cloud computing market. Like other big tech firms, it has access to its own foundational model, through partner firm OpenAI’s ChatGPT. OpenAI’s brand status as the firm that popularized AI also allows Microsoft Corporation (NASDAQ:MSFT) to benefit from the association. This is key to the firm’s future especially as it plans to market AI products to enterprise customers through cloud computing. The central tenet of Microsoft Corporation (NASDAQ:MSFT)’s hypothesis these days is its ability to monetize AI especially since it has plowed billions of dollars into the technology. In fact, after its Q2 earnings, Microsoft Corporation (NASDAQ:MSFT)’s shares tanked by 8% as it revealed that Azure growth had slowed to 29% from an earlier 31%––which cast doubts on its ability to add tailwinds from AI services.
The stock began to recover though as Microsoft Corporation (NASDAQ:MSFT)’s shared during the earnings call:
“For Intelligent Cloud we expect revenue to grow between 18% and 20% in constant currency, or US$28.6 billion to US$28.9 billion. Revenue will continue to be driven by Azure which, as a reminder, can have quarterly variability primarily from our per-user business and in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q1 revenue growth to be 28% to 29% in constant currency. Growth will continue to be driven by our consumption business, inclusive of AI, which is growing faster than total Azure. We expect the consumption trends from Q4 to continue through the first half of the year. This includes both AI demand impacted by capacity constraints and non-AI growth trends similar to June. Growth in our per-user business will continue to moderate.
And in H2, we expect Azure growth to accelerate as our capital investments create an increase in available AI capacity to serve more of the growing demand. In our on-premises server business, we expect revenue to decline in the low single digits as continued hybrid demand will be more than offset by lower transactional purchasing. And in Enterprise and partner services, revenue should decline in the low single digits. In More Personal Computing, we expect revenue to grow between 9% and 12% in constant currency, or US$14.9 billion to US$15.3 billion. Windows OEM revenue growth should be relatively flat, roughly in line with the PC market. In Windows commercial products and cloud services, customer demand for Microsoft 365 and our advanced security solutions should drive revenue growth in the mid-single digits.”
