Microsoft tops quarterly cloud growth estimates, easing spending concerns

July 29 (Reuters) - Microsoft MSFT.O topped Wall Street estimates for quarterly cloud revenue growth on Wednesday, a sign its massive spending on AI infrastructure was paying off as capacity constraints ease and more businesses adopt the technology.

Revenue at the company's Azure cloud-computing business rose 43% in its fiscal fourth quarter, compared with analysts' consensus estimate of 39.98%, according to Visible Alpha.

The strong growth could ease some concerns on Microsoft, which has been under pressure due to surging data center outlays and fears that AI tools could displace its long-reliable productivity software business.

It follows Google GOOGL.O Cloud's blockbuster quarter, with the rival posting an 82% surge in cloud revenue last week, far ahead of market expectations.

Microsoft has forecast spending $190 billion this calendar year, part of the more than $700 billion in unprecedented Big Tech outlays that have strained the companies' cash flows and stoked fears of capacity overbuild.

Meanwhile, the company is cutting dependence on OpenAI's technology by adding Anthropic's models into its offerings and developing in-house AI, while leaning on its deep business ties to boost adoption of the $30-a-month Copilot, including through deals such as the one with Accenture earlier this year.

The company is among the worst performers in the so-called "Magnificent Seven" group of mega-caps with an 18% drop so far this year, trailing cloud rivals such as Alphabet.

Microsoft has said its cloud growth is being held back by capacity constraints that it expects to persist at least through the end of 2026. That has forced the company to choose between powering its own AI services such as the Copilot 365 assistant and renting computing power to customers through Azure.

Still, some analysts say the concerns around Microsoft are overblown, noting that AI demand remains strong and it has made efforts to ease constraints through deals beyond its own data-center build-out, such as a recent tie-up with France's Mistral.