Microsoft’s investors worry over rising infrastructure costs and slow payoff from AI.

When Microsoft releases its earnings on Tuesday, investors’ main issue will be whether the company’s growth in its Azure cloud computing business has accelerated enough to warrant spending billions of dollars on artificial intelligence technology.

Thanks to its partnership with ChatGPT creator OpenAI, Microsoft is widely regarded as the leader in the race to profit from AI.

Based on statistics from Visible Alpha, Microsoft is anticipated to disclose that Azure’s growth remained consistent quarter-over-quarter at roughly 31% between April and June.

That would be consistent with the company’s projection. Still, investors anticipate that the AI division will contribute more in the fourth quarter of the company’s fiscal year after contributing seven percentage points to Azure’s growth in the first three months of the year.

According to 16 analysts surveyed by LSEG, Microsoft’s capital spending probably increased by roughly 53% this year to $13.64 billion during that time. A big step up from the $10.95 billion in expenditure it recorded in the previous quarter.

This month worries that Wall Street may have grown overly bullish about earnings growth have plagued the U.S. stock market.

These worries stem from concerns that tech firms’ reckless spending on data centres would not pay off in the short term.

Alphabet, the parent company of Google, saw a selloff in big tech businesses last week as its quarterly capital investment above projections by roughly $1 billion, despite a minor revenue bump from AI integrations.

This resulted in a more than 5% decline in the company’s shares.

For the remainder of 2024, Alphabet predicted that its quarterly capital expenditures would remain high, at or above $12 billion.

“The capacity of Microsoft to sustainably increase revenue growth, particularly in the AI-related segment, will be of great interest to investors.

Investors can be let down if revenue acceleration doesn’t happen and capital expenditures keep going up, according to Gil Luria, senior software analyst at D.A. Davidson.