Microsoft investors in "wait-and-see mode" after first-quarter results: RBC

Investing.com - Microsoft's first-quarter results and its current-quarter guidance have left many disappointed investors in "wait-and-see mode," according to analysts at RBC Capital Markets.

In October, Microsoft (NASDAQ:MSFT ) said its capital expenditures would expand because of ongoing investments into building out its artificial intelligence capabilities. The company has turned itself into one of the foremost figures of the boom in enthusiasm around the nascent technology, thanks in particular to the success of its Azure cloud business and a partnership with ChatGPT-maker OpenAI.

However, many observers have flagged doubts around the pay-off from the AI push's massive spending on data centers, high-end graphics processing units and other networking equipment.

Meanwhile, Azure's revenue rose by 33% in its first quarter, just above analyst estimates of around 32%, although Chief Financial Officer Amy Hood flagged the segment's growth would slow to between 31% to 32% in its second quarter.

The RBC analysts predicted that Azure's third-quarter expansion will top that of the second quarter, and speed up further in the final three-month period of Microsoft's financial year. This would "ultimately [lead] to [second-half] Azure growth of 34% to 35%, which we believe would be true acceleration from [the first half] and set Microsoft well up for [its 2026 fiscal year]," the analysts said.

For its fiscal first quarter, the company posted earnings per share of $3.3 on revenue of $40.59 billion. Analysts polled by Investing.com anticipated per-share income of $5.21 on revenue of $40.18 billion.

In a note to clients, the RBC analysts led by Rishi Jaluria said its conversations with investors have shown that many are "on the sidelines or underweight" regarding Microsoft's shares until the firm releases its fiscal second-quarter returns. Microsoft's annual developers conference next week is also not expected to be a catalyst for the stock, the analysts said.

Source: Investing.com