Microsoft is set to release its second quarter earnings report on Tuesday, with investors eagerly awaiting signs that the company's substantial investments in artificial intelligence (AI) will continue to yield positive results. The tech giant has been a major beneficiary of the growing AI domain, with its shares surging 50% in the past year and its market capitalization exceeding $3 trillion.

As of Monday, Microsoft held the title of the world's wealthiest company by market cap, beating out long-time rival Apple, which has faced stock downgrades due to concerns about sluggish iPhone sales in China. Analyst estimates compiled by Bloomberg indicate that Wall Street expects Microsoft to post adjusted earnings per share of $2.78 on revenue of $61.1 billion for the quarter, reflecting a significant increase compared to the same period last year when the company recorded an EPS of $2.32 on revenue of $52.7 billion.

Microsoft's Intelligent Cloud segment, which includes its Azure service, is anticipated to generate $25.3 billion in the quarter, up from the $21.5 billion reported in Q2 of the previous year. Overall, Microsoft Cloud revenue is projected to surpass $32.2 billion, compared to $27.1 billion in the previous year. Additionally, the company's Productivity and Business Processes revenue is expected to reach $19 billion, an increase from $17 billion reported in the second quarter of the previous year. Meanwhile, the More Personal Computing business, encompassing Windows software sales and Xbox gaming, is estimated to bring in $16.8 billion compared to $14.2 billion the prior year.

Microsoft has heavily invested in AI across its various business divisions, and the success of these endeavors is a top priority for the company. It has monetized its AI initiatives through generative AI cloud services, such as the Copilot for Microsoft 365 productivity platform. Microsoft recently expanded access to Copilot for Microsoft 365 to all businesses, removing the requirement of a minimum of 300 employees to sign up for the paid service. The cost for clients to access the software is $30 per user per month. Additionally, Microsoft offers Copilot Pro, a version tailored for consumer customers who desire more advanced features, at a cost of $20 per month per user.

Microsoft, along with tech rivals Google and Amazon, has allocated substantial resources to AI investments in the past year as each company competes to establish dominance in the AI software industry. While Microsoft gained an early advantage through its investment in ChatGPT developer OpenAI, Google and Amazon are catching up. Google launched its powerful Gemini AI model in December, and in September, Amazon announced a $4 billion investment in AI company Anthropic, securing a minority ownership position.

Despite recent controversies surrounding generative AI technology, such as the creation of explicit deepfake images of Taylor Swift, the AI train shows no signs of slowing down. With constant product announcements revolving around AI technology and PC and smartphone vendors introducing devices capable of natively running generative AI software, it is clear that generative AI will play a significant role in the tech industry throughout 2024. Microsoft and its competitors must now deliver on the substantial hype and financial investments made in the AI domain.