Latest news with #DanMorgan
CTV News
3 hours ago
- Business
- CTV News
Microsoft's AI edge under scrutiny as OpenAI turns to rivals for cloud services
A Microsoft sign and logo are pictured at the company's headquarters, Friday, April 4, 2025, in Redmond, Wash. (AP Photo/Jason Redmond, File) Microsoft investors head into Wednesday's earnings with one big question: is the company's artificial intelligence edge at risk as partner OpenAI turns to rivals Google, Oracle and CoreWeave for cloud services? Exclusive licensing deals and access to OpenAI's cutting-edge models have made Microsoft one of the biggest winners of the generative AI boom, fueling growth in its Azure cloud business and pushing its market value toward US$4 trillion. In the April-June quarter, the tie-up is expected to have driven a 34.8 per cent increase in Azure revenue, in line with the company's forecast and higher than the 33 per cent rise in the previous three months, according to data from Visible Alpha. But that deal is being renegotiated as OpenAI eyes a public listing, with media reports suggesting a deadlock over how much access Microsoft will retain to ChatGPT maker's technology and its stake if OpenAI converts into a public-benefit corporation. The conversion cannot proceed without Microsoft's sign-off and is crucial for a US$40 billion funding round led by Japanese conglomerate SoftBank Group, US$20 billion of which is contingent on the restructuring being completed by the end of the year. OpenAI, which recently deepened its Oracle tie-up with a planned 4.5 gigawatts data center capacity, has also added Google Cloud among its suppliers for computing capacity. UBS analysts said investor views on the Microsoft–OpenAI partnership are divided, though the software giant holds an upper hand. 'Microsoft's leadership earned enough credibility … such that the company will end up negotiating terms that will be in the interest of its shareholders,' the analysts said. Some of that confidence is reflected in the company's stock price, which has risen by more than a fifth so far this year. In the April-June period, Microsoft's fiscal fourth quarter, the company likely benefited from a weaker dollar, stronger non-AI Azure demand and PC makers pulling forward orders for its Windows products ahead of possible U.S. tariffs. Revenue is expected to have risen 14 per cent to US$73.81 billion, according to data compiled by LSEG, its best growth in three quarters. Profit is estimated to have increased 14.2 per cent to US$25.16 billion, slightly slower than the previous quarter as operating costs rose. Capital spending will also be in focus after rival Alphabet raised its annual outlay by US$10 billion last week. Microsoft has repeatedly said it remains capacity constrained on AI, and in April signaled continued growth in capex after planned spending of over US$80 billion last fiscal year, though at a slower pace and on shorter-lived assets such as AI chips. Dan Morgan, senior portfolio manager at Synovus Trust who owns Microsoft shares, said the spending has been paying off. 'Investors may still be underestimating the potential for Microsoft's AI business to drive durable consumption growth in the agentic AI era.' --- Reporting by Aditya Soni in Bengaluru; Editing by Shinjini Ganguli
The Star
11 hours ago
- Business
- The Star
Microsoft's AI edge under scrutiny as OpenAI turns to rivals for cloud services
FILE PHOTO: A view shows a Microsoft logo at Microsoft offices in Issy-les-Moulineaux near Paris, France, January 9, 2025. REUTERS/Gonzalo Fuentes/File Photo (Reuters) -Microsoft investors head into Wednesday's earnings with one big question: is the company's artificial intelligence edge at risk as partner OpenAI turns to rivals Google, Oracle and CoreWeave for cloud services? Exclusive licensing deals and access to OpenAI's cutting-edge models have made Microsoft one of the biggest winners of the generative AI boom, fueling growth in its Azure cloud business and pushing its market value toward $4 trillion. In the April-June quarter, the tie-up is expected to have driven a 34.8% increase in Azure revenue, in line with the company's forecast and higher than the 33% rise in the previous three months, according to data from Visible Alpha. But that deal is being renegotiated as OpenAI eyes a public listing, with media reports suggesting a deadlock over how much access Microsoft will retain to ChatGPT maker's technology and its stake if OpenAI converts into a public-benefit corporation. The conversion cannot proceed without Microsoft's sign-off and is crucial for a $40 billion funding round led by Japanese conglomerate SoftBank Group, $20 billion of which is contingent on the restructuring being completed by the end of the year. OpenAI, which recently deepened its Oracle tie-up with a planned 4.5 gigawatts data center capacity, has also added Google Cloud among its suppliers for computing capacity. UBS analysts said investor views on the Microsoft–OpenAI partnership are divided, though the software giant holds an upper hand. "Microsoft's leadership earned enough credibility … such that the company will end up negotiating terms that will be in the interest of its shareholders," the analysts said. Some of that confidence is reflected in the company's stock price, which has risen by more than a fifth so far this year. In the April-June period, Microsoft's fiscal fourth quarter, the company likely benefited from a weaker dollar, stronger non-AI Azure demandand PC makers pulling forward orders for its Windows products ahead of possible U.S. tariffs. Revenue is expected to have risen 14% to $73.81 billion, according to data compiled by LSEG, its best growth in three quarters. Profit is estimated to have increased 14.2% to $25.16 billion, slightly slower than the previous quarter as operating costs rose. Capital spending will also be in focus after rival Alphabet raised its annual outlay by $10 billion last week. Microsoft has repeatedly said it remains capacity constrained on AI, and in April signaled continued growth in capex after planned spending of over $80 billion last fiscal year, though at a slower pace and on shorter-lived assets such as AI chips. Dan Morgan, senior portfolio manager at Synovus Trust who owns Microsoft shares, said the spending has been paying off. "Investors may still be underestimating the potential for Microsoft's AI business to drive durable consumption growth in the agentic AI era." (Reporting by Aditya Soni in Bengaluru; Editing by Shinjini Ganguli)
The Star
6 days ago
- Business
- The Star
IBM's software sales disappoint, eclipsing AI mainframe revival
The IBM logo is seen during the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France, June 12, 2025. REUTERS/Benoit Tessier (Reuters) -IBM beat Wall Street estimates for second-quarter revenue and profit on Wednesday, but lower-than-expected sales in its mainstay software segment overshadowed a renewal in demand for the mainframe business spurred by AI upgrades. IBM's shares fell 5% in extended trading, after a nearly 30% rise this year driven by investors betting on prioritized software spending as businesses navigated macroeconomic uncertainty and ongoing trade negotiations. "You're seeing the stock pull back, because there's just not a lot of room to miss," said Dan Morgan, senior portfolio manager at Synovus Trust, which holds shares in IBM. "This would be more evidence that software is not growing at the pace that the Street was expecting." IBM's software segment, which has traditionally been a bright spot, reported sales of $7.39 billion, missing analysts' average estimate of $7.41 billion, according to data compiled by LSEG. Customers funneled investment towards IBM's latest AI-specialized mainframes, diverting revenue from transaction processing, which primarily accounts for software run on the mainframe, finance chief Jim Kavanaugh told Reuters. Transaction processing sales — which were mostly flat in the quarter — are housed in the software unit, dragging the segment's performance. The infrastructure segment, which houses its mainframe, reported revenue of $4.14 billion, beating estimates of $3.81 billion. The Big Blue reported revenue of $16.98 billion for the June quarter, beating estimates of $16.59 billion. Adjusted earnings of $2.80 per share also beat estimates. Consulting sales grew 3%, ending five consecutive quarters of revenue declines, as businesses seek expertise on integrating AI products. However, given the "current demand environment," IBM is "prudently cautious" on how much the consulting segment might contribute to further growth this year, Kavanaugh said during a post-earnings call. Its "AI book of business," which combines bookings and actual sales, grew to $7.5 billion, up $1.5 billion from the previous quarter. IBM did not provide a forecast for the third quarter, after it broke tradition in April and issued a one-off quarterly outlook to give investors more clarity at a time when U.S. President Donald Trump's global tariffs were first going into effect. (Reporting by Arsheeya Bajwa in Bengaluru; Editing by Alan Barona)
Business Times
6 days ago
- Business
- Business Times
IBM's software sales disappoint, eclipsing AI mainframe revival
[BENGALURU] IBM beat Wall Street estimates for second-quarter revenue and profit on Wednesday (Jul 23), but lower-than-expected sales in its mainstay software segment overshadowed a renewal in demand for the mainframe business spurred by artificial intelligence (AI) upgrades. IBM's shares fell 5 per cent in extended trading, after a nearly 30 per cent rise this year driven by investors betting on prioritised software spending as businesses navigated macroeconomic uncertainty and ongoing trade negotiations. 'You are seeing the stock pull back, because there's just not a lot of room to miss,' said Dan Morgan, senior portfolio manager at Synovus Trust, which holds shares in IBM. 'This would be more evidence that software is not growing at the pace that the Street was expecting.' IBM's software segment, which has traditionally been a bright spot, reported sales of US$7.39 billion, missing analysts' average estimate of US$7.41 billion, according to data compiled by LSEG. Customers funnelled investment towards IBM's latest AI-specialised mainframes, diverting revenue from transaction processing, which primarily accounts for software run on the mainframe, finance chief Jim Kavanaugh said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Transaction processing sales, which were mostly flat in the quarter, are housed in the software unit, dragging the segment's performance. The infrastructure segment, which houses its mainframe, reported revenue of US$4.14 billion, beating estimates of US$3.81 billion. The Big Blue reported revenue of US$16.98 billion for the June quarter, beating estimates of US$16.59 billion. Adjusted earnings of US$2.80 per share also beat estimates. Consulting sales grew 3 per cent, ending five consecutive quarters of revenue declines, as businesses seek expertise on integrating AI products. However, given the 'current demand environment', IBM is 'prudently cautious' on how much the consulting segment might contribute to further growth this year, Kavanaugh said during a post-earnings call. Its 'AI book of business', which combines bookings and actual sales, grew to US$7.5 billion, up US$1.5 billion from the previous quarter. IBM did not provide a forecast for the third quarter, after it broke tradition in April and issued a one-off quarterly outlook to give investors more clarity at a time when US President Donald Trump's global tariffs were first going into effect. REUTERS
Reuters
6 days ago
- Business
- Reuters
IBM's software sales disappoint, eclipsing AI mainframe revival
July 23 (Reuters) - IBM (IBM.N), opens new tab beat Wall Street estimates for second-quarter revenue and profit on Wednesday, but lower-than-expected sales in its mainstay software segment overshadowed a renewal in demand for the mainframe business spurred by AI upgrades. IBM's shares fell 5% in extended trading, after a nearly 30% rise this year driven by investors betting on prioritized software spending as businesses navigated macroeconomic uncertainty and ongoing trade negotiations. "You're seeing the stock pull back, because there's just not a lot of room to miss," said Dan Morgan, senior portfolio manager at Synovus Trust, which holds shares in IBM. "This would be more evidence that software is not growing at the pace that the street was expecting." IBM's software segment, which has traditionally been a bright spot, reported sales of $7.39 billion, missing estimates of $7.41 billion. Still, the Big Blue reported revenue of $16.98 billion for the June quarter, beating analysts' average estimate of $16.59 billion, according to data compiled by LSEG. Adjusted earnings of $2.80 per share also beat estimates. The infrastructure segment, which houses its mainframe, reported revenue of $4.14 billion, beating estimates of $3.81 billion. Sales of IBM's latest AI-specialized mainframe kicked off in June, boosting second-quarter revenue. Its "AI book of business," which combines bookings and actual sales, grew to $7.5 billion, up $1.5 billion from the previous quarter. Investors might be unimpressed, however, as the book is "cumulative, not revenue, and lacks granularity," said Michael Ashley Schulman, Running Point Capital's chief investment officer. IBM did not provide a forecast for the third quarter, after it broke tradition in April and issued a one-off quarterly outlook to give investors more clarity at a time when U.S. President Donald Trump's global tariffs were first going into effect. "That quarterly guidance was really driven by the unprecedented volatility of the foreign exchange markets" finance chief Jim Kavanaugh told Reuters. "What is different over the past 90 days — the FX world is kind of stabilized ... so we reverted back to our standard practice." Consulting sales grew 3%, ending five consecutive quarters of revenue declines, as businesses seek expertise on integrating AI products.
