Microsoft denies report of lowering targets for AI software sales growth
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Dec 3 : Microsoft on Wednesday denied a report from The Information that multiple divisions at the company lowered sales growth targets for certain artificial intelligence products after several sales staff missed their goals in the fiscal year that ended in June.
The source-based report cited two salespeople in the Azure cloud-computing unit, which is closely watched by investors as it is the main beneficiary of Microsoft's AI push.
"The Information's story inaccurately combines the concepts of growth and sales quotas, which shows their lack of understanding of the way a sales organization works and is compensated," a company spokesperson said in a statement.
"Aggregate sales quotas for AI products have not been lowered, as we informed them prior to publication."
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Following Microsoft's denial, its shares, which were down nearly 3 per cent in early trading, pared losses. The stock was last down 1.7 per cent. Reuters could not independently verify the report from The Information.
WORRIES OVER AI BUBBLE
Surging tech valuations and signs of slow adoption of the nascent AI technology have fueled fears in recent months of a growing bubble, similar to the dot-com boom of the 1990s.
An MIT study from earlier this year had found that only about 5 per cent of AI projects advance beyond the pilot stage.
The Information report said Carlyle Group last year started using Copilot Studio to automate tasks such as meeting summaries and financial models, but cut its spending on the product after flagging Microsoft about its struggles to get the software to reliably pull data from other
The report said one U.S. Azure sales unit had set quotas for sales staff to lift customer spending on Foundry, a tool used to build AI applications, by 50 per cent in the last fiscal year, but less than a fifth met the targets.
The company in July lowered their targets to roughly 25 per cent growth for the current fiscal year compared to the last one, it said.
Microsoft did not respond to queries on whether Carlyle had cut back spending on Copilot Studio.
Several analysts have said that companies were still in the early stages of adopting AI and some challenges were likely.
"That does not mean there isn't promise for AI products to help companies become more productive, just that it may be harder than they thought," D.A. Davidson analyst Gil Luria.
U.S. tech giants are under investor pressure to prove that their hefty investments in AI infrastructure are generating returns.
RECORD SPENDING
Microsoft reported a record capital expenditure of nearly $35 billion for its fiscal first quarter in October and warned that spending would rise this year. Overall, U.S. tech giants are expected to spend around $400 billion on AI this year.
The companies have said the outlay is necessary to overcome supply constraints that have hobbled their ability to capitalize on AI demand.
Microsoft has predicted it would remain short on AI capacity at least until the end of its current fiscal year in June 2026.
The spending has so far paid off for the Satya Nadella-led company as revenue at its Azure cloud-computing unit grew 40 per cent in the July-September period, outpacing expectations. Its fiscal second-quarter forecast was also above estimates.
The AI push has also helped Microsoft become the second company to hit a $4 trillion valuation this year after Nvidia, although its market value has retreated since then.
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