Microsoft’s cloud division misses growth targets amid slower demand for AI services
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Microsoft announced slow business growth in its cloud business in Q1 2025 as it struggles to create data centers that can handle the demand for its AI. The trend may continue from the last quarter when its cloud computing business saw disappointing growth due to constraints in the data supply network. Microsoft shares dropped 4.5% in after-hours trading, with most investors frustrated by big spending, slippery AI revenue, and stiff competition from China’s AI models. Azure may grow 31% or 32% this quarter, a projection that adds misery to investors. DeepSeek, an AI model built in China, has sparked fear among investors due to its quick success. The concerns are real, driving most known AI stocks down, including Azure. However, Microsoft Chief Executive Satya Nadella is standing strong that his firm is progressing in the AI model it develops and operates. Nadella said that whatever Microsoft is experiencing is common in regular computer cycles. Other chip-based technologies have, at one point, also experienced cost declines. The chief executive officer praised DeepSeek’s innovation and the technology it used. The Chinese-made AI technology is likely to be replicated due to its affordability and efficiency. Microsoft leads in commercializing AI products Microsoft is a leader in commercializing AI products, driven by its partnership with OpenAI. In 2024, The software maker released a snowstorm of Copiloted AI assistants but has failed to adequately monetize them. The snail pace of monetizing these products worries most investors, who may consider other options should the trend persist. According to Microsoft, Azure AI services increased by 157%. However, the growth has not translated into sales due to the company’s insufficient data centre capacity to meet users’ needs. The company is consolidating efforts to improve its data centre capacity before the financial year ends. Azure has almost $300 billion…
Filed under: News - @ January 30, 2025 6:23 pm