Microsoft Cloud, AI demand up: Cues for TCS, Infosys, HCL Tech, Wipro, TechM

Domestic IT companies such as Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies Ltd and Tech Mahindra are in focus as Microsoft’s Q4 revenue slightly beat US analyst estimates while its operating margin came largely in-line with Wall Street estimates. Microsoft suggested that infrastructure investments in FY25 could be higher than FY24 to meet the growing demand for AI and cloud products. 

The Satya Nadella-led IT major guided for Q1FY25 revenue growth of 13.5–15.3 per cent YoY, driven by 19.2–20.5 per cent YoY growth in Intelligent Cloud, in turn, led by 28–29 per cent CC YoY growth in Azure.

Nuvama Institutional Equities said Microsoft's growth has been consistently accelerating in its Azure business for five consecutive quarters, after decelerating for over six consecutive quarters. 

"While AI contributed 8 per cent to Azure growth, the pickup in overall cloud services is encouraging and bodes well for Indian IT services companies. We estimate a pickup in cloud spending in FY25, after a modest FY24 – leading to higher overall growth in FY25," it said.

Microsoft reported revenue of $64.7 billion, up 16 per cent YoY in constant currency (CC) terms. Intelligent Cloud was the fastest-growing segment as its revenue grew 20 per cent YoY in CC to $28.5 billion, within its guidance. Azure revenue grew 30 per cent CC YoY including 800 bpd from AI services.

The Microsoft management highlighted Azure consumption business is growing faster than total Azure. The total number of Azure AI customers were up 60 per centYoY and Microsoft now has over 60,000 Azure AI customers. Demand for Azure continues to outstrip the available capacity, it said.

"Productivity and business process revenue came in at $20.3 billion, up 12 per cent CC YoY. Office consumer revenue grew 4 per cent CC YoY driven by continued momentum in Microsoft 365 subscriptions while Office commercial licensing declined 7 per cent CC YoY due to continued shift to cloud offerings," it said.