Microsoft Fiscal Q1 Earnings: Operating Leverage from AI

Although Microsoft guided Azure growth to decelerate 1-2pts for the December quarter and then to be “stable” throughout FY24, analysts were digging to find out if conservatism was baked into the guide, and how much room there is for potential upside in Azure based on new workload starts, mostly driven by AI workloads. In addition to this, optimizations were peaking in H2 of last fiscal year, and so that is technically a tailwind as Microsoft laps those quarters in H2 of this fiscal year. Although Azure tends to grab the headlines, the margins were also impressive.

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