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Microsoft will report its second-quarter earnings for fiscal year 2025 Wednesday as questions over multibillion-dollar spending on AI continue to mount, spurred by DeepSeek’s shock to the US stock market just days ago.
Wall Street expects $3.11 in earnings per share and revenue of $68.9bn, compared with $2.93 a share and revenue of $62bn for the same period a year earlier.
Shares in the company, worth a total of $3.28tn, are up roughly 8% over the past 12 months, even as it has poured capital investment into AI and plans $80bn on new AI spending this year. Meta has made similar commitments; US tech giants are rushing to gain an edge over their competitors in the AI race.
The company said in a blogpost on 3 January that it planned “to build out AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world”.
The company’s earnings report comes in the shadow of a sell-off in AI-exposed companies on Monday when a Chinese company, DeepSeek, said its AI model had achieved similar results to those of US companies at a fraction of the cost. Chipmaker Nvidia lost some $600bn in market capitalization, though it recovered part of that value in the ensuing days of trading.
The implications of DeepSeek’s apparent AI cost breakthrough – it claims to have spent mere millions training its model – raises questions over the past year’s $5tn AI-related run-up in the overall market value of the tech giants known as the “magnificent seven” on Wall Street: Meta, Microsoft, Alphabet, Amazon, Apple, Nvidia and Tesla. The gains accounted for much of the S&P 500’s roughly 70% advance over that period, which has slowed as concerns that returns on AI-capital spending, estimated at more than $200bn over the past year with more scheduled for this year, are still elusive.
Microsoft and AI partner OpenAI are investigating whether data output from OpenAI’s technology was obtained in an unauthorized manner by a group linked to DeepSeek, according to Bloomberg.
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David Sacks, the White House’s AI and crypto czar, told Fox News that it was “possible” that DeepSeek had stolen intellectual property from the United States, saying: “There’s substantial evidence that what DeepSeek did here is they distilled the knowledge out of OpenAI’s models.”
Earlier this month, Microsoft lost its exclusive position as OpenAI’s provider of computing capacity but maintains the “right of first refusal” before OpenAI checks with other parties, according to a blogpost.
On Tuesday, OpenAI’s Sam Altman posted a picture with the Microsoft CEO, Satya Nadella, suggesting the alliance between his company and Microsoft was still strong. Altman wrote that the “next phase” of the partnership was “gonna be much better than anyone is ready for!!” Nadella responded to the post, saying he was “looking forward to all that’s ahead!”
