(C) Nairametrics
SAN FRANCISCO – Microsoft Corp. announced on Wednesday that its revenue for the second fiscal quarter (October–December) rose 17% year-over-year to $81.27 billion, surpassing Wall Street expectations. However, despite the strong headline figures, the company’s stock trended lower in after-hours trading as investors focused on a slight deceleration in its flagship cloud business.
Surpassing Market Expectations
According to the earnings report, Microsoft’s revenue of $81.27 billion comfortably beat the $80.27 billion consensus estimate compiled by LSEG. The company’s bottom line also showed significant strength, with an operating profit of $38.3 billion (up 21%) and earnings per share (EPS) of $4.14, exceeding the projected $3.97.
Cloud and AI Performance
The "Intelligent Cloud" segment, a critical engine for Microsoft’s valuation, posted $32.9 billion in revenue, a 29% increase from the previous year. This surpassed the $32.4 billion estimate provided by StreetAccount.
However, the spotlight was on Azure, Microsoft’s public cloud platform. While Azure revenue grew by a robust 39%, it represented a slight dip from the 40% growth recorded in the preceding quarter. This marginal slowdown appeared to spook investors who have grown accustomed to accelerating AI-driven expansion.
CEO Satya Nadella remained bullish on the company's trajectory, stating, "Even in these early stages of AI adoption, we have built an AI business larger than many of our major franchises. We are pushing the boundaries across the AI stack to create new value for our customers."
Mixed Results Across Segments
Productivity and Business Processes: This segment, which includes Microsoft 365 and LinkedIn, performed well with $34.1 billion in revenue.
More Personal Computing: This area, encompassing Windows OS and Xbox, saw a 3% decline, falling to $14.3 billion.
CFO Amy Hood highlighted that total Microsoft Cloud revenue surpassed the $50 billion milestone this quarter, reflecting "strong demand across our portfolio."
Market Reaction and Stock Performance
Despite the positive earnings beat, Microsoft’s stock price faced pressure. Over the past three months, while the S&P 500 rose by 1.6%, Microsoft shares have declined by 11%.
On the day of the announcement, the stock closed up 0.22% at $481.63 in regular trading. However, shortly after the results were released, shares tumbled more than 3.5% in after-hours trading, hovering around the $464 mark. Analysts attribute this volatility to the "high-bar" set by investors for cloud growth, where even a 1% deceleration is scrutinized amid massive capital expenditures on AI infrastructure.
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