Can Microsoft's AI Ambitions Sustain Its Cloud Growth Amid Layoffs?

Microsoft is expected to report nearly $74 billion in fourth quarter revenue for fiscal year 2025, driven by increased corporate demand for artificial intelligence and growth in cloud services such as Azure OpenAI Services and GitHub Copilot. The company’s capital expenditures reached over $21 billion in the third quarter, contributing to an estimated $80 billion in annual infrastructure spending and resulting in a decline in cloud gross margins from 72% to 69%. Microsoft implemented layoffs affecting over 15,000 employees to manage rising costs, citing shifting priorities and resource reallocation, while overall headcount remains stable due to ongoing hiring. Microsoft Cloud, including Azure, Microsoft 365, Dynamics 365, and LinkedIn commercial services, reported $42.4 billion in revenue last quarter, up 20% year-over-year. Analysts identify operational expense control and continued investment in AI and cloud infrastructure as key factors for sustained growth.

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