Amid shortage of data centres, Microsoft cloud computing biz to go slow
By MYBRANDBOOK
Microsoft said that its cloud-computing business will continue to grow slowly in the current quarter as the company struggles to build enough data centers to handle demand for its AI products. The Azure cloud division will grow at 32 per cent in its fiscal third quarter. The Redmond-based software maker is considered a leader in commercializing artificial intelligence products, thanks to its close partnership with OpenAI.
In the past year, Microsoft has unleashed a blizzard of Copilot-branded AI assistants, but efforts to monetize those products are taking longer than some investors would prefer.
According to Chief Financial Officer Amy Hood, Microsoft said Azure AI services grew 157 per cent. But overall sales in its cloud unit are being hurt by the fact that the company still doesn’t have enough data center capacity to meet customer needs. She later told investors that the capacity constraints should be addressed by the end of the fiscal year.
Also Read: OpenAI eyes $25 billion investment from SoftBank
She further said that the company has almost $300 billion worth of commercial service contracts that Microsoft must provide in the future and has not yet recognized as revenue.
Demand remains strong, with commercial bookings — a measure of future revenue — rising 67 per cent, “far ahead” of what Microsoft had expected, she said. Hood attributed that partly to Azure commitments from OpenAI.
Along with cloud rivals Google and Amazon.com Inc., Microsoft is spending more than it ever has in its history, outlays that mostly go to the chips and data centers required to fuel power-hungry AI services. The company has said it expects to spend $80 billion this fiscal year on AI data centers.
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