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Microsoft Forecasts AI Spending Surge Amid Slower Azure Growth

Microsoft has announced expectations for increased spending on artificial intelligence (AI) in the current quarter but cautioned that growth in its Azure cloud business may slow down due to capacity constraints at its data centers. Shares of the Redmond, Washington-based company fell 3.6% in after-market trading, reversing earlier gains despite reporting better-than-expected first-quarter revenue and profit figures.

In its earnings report, Microsoft revealed that while AI contributed significantly to Azure’s growth—accounting for 12 percentage points in the first quarter—the company anticipates Azure revenue growth of only 31% to 32% for the second quarter. This projection falls short of the 32.25% growth anticipated by analysts.

Brett Iversen, Microsoft’s vice president of investor relations, stated that the company would not address AI capacity limitations until the latter half of its fiscal year. The company’s investments in AI infrastructure and data center expansion continue to rise, with capital expenditures reaching $20 billion for the quarter, up 5.3% from the previous quarter and exceeding analyst expectations.

Despite these efforts, concerns about heavy spending persist. Microsoft is projected to spend over $80 billion in the current fiscal year, marking an increase of more than $30 billion from the previous year. This substantial investment contrasts sharply with its performance compared to other major tech companies; Microsoft has gained just over 15% this year, while Meta has surged by 68% and Amazon has climbed 28%.

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