Microsoft Corp. (MSFT), a tech giant that recently achieved the remarkable milestone of reaching a market capitalization of $3 trillion, is set to unveil its second-quarter fiscal 2024 earnings on Tuesday after the market closes. Industry analysts are anticipating Microsoft to report its highest revenue in seven quarters, accompanied by an increase in earnings per share (EPS), as the company’s AI-driven cloud services continue their impressive ascent.

Forecasts from analysts suggest that Microsoft will reveal a net income of $20.6 billion, equivalent to $2.77 per share. This represents a notable improvement from the prior-year quarter, which reported figures of $17.4 billion and $2.20, respectively, according to data aggregated by Visible Alpha. The consensus also expects the company to disclose total revenue of $61 billion, marking an impressive nearly 16% year-over-year increase and the most substantial growth in this aspect in nearly two years.

Key Performance Metric: Intelligent Cloud Revenue Microsoft’s strategic investment in artificial intelligence (AI), involving a substantial financial commitment with OpenAI, the creator of ChatGPT, has been a pivotal move to infuse AI across various products. The bulk of Microsoft’s foray into AI resides within its Intelligent Cloud segment, which includes Azure, Nuance, Windows Server, and Enterprise Services, among other offerings. This substantial investment appears to be yielding positive results, as a survey conducted by Morgan Stanley among Chief Information Officers (CIOs) revealed that more than two-thirds of them plan to adopt Microsoft AI tools in the coming year.

The Intelligent Cloud quarterly revenue, having approximately doubled over the last three years, is expected to reach an unprecedented high of $25.3 billion in the latest quarter, as per projections from Visible Alpha. This would signify an approximately 18% year-over-year increase.

Business Focus While Microsoft’s embrace of AI is anticipated to contribute significantly to its financial performance, the company has encountered legal challenges along the way. In late 2023, the New York Times filed a lawsuit against Microsoft and OpenAI, alleging copyright infringement. The claim asserts that ChatGPT was trained using millions of copyrighted articles, seeking “billions of dollars in statutory and actual damages.” Additionally, Microsoft is under scrutiny by the U.K.’s competition watchdog, examining whether its partnership with OpenAI might impact competition. Recently, the Federal Trade Commission initiated an inquiry into Microsoft and OpenAI as part of a broader examination of investments and partnerships in the AI sector.

Despite these legal challenges, Microsoft’s shares were among the top performers in the already thriving tech space last year. The company’s stock has surged by approximately 63% over the past year, as of the close of trading on Friday.

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