Satya Nadella, CEO of Microsoft, arrives for the annual Allen and Co. Sun Valley Media and Technology Conference at the Sun Valley Resort in Sun Valley, Idaho, July 9, 2024.
Brendan McDermid | Reuters
Microsoft shares fell 5% in extended trading on Wednesday after the software company issued fiscal second quarter results that included lighter growth in Azure cloud computing services than expected.
Here’s how the company did in comparison with LSEG estimates:
- Earnings per share: $3.23 vs. $3.11 expected
- Revenue: $69.63 billion vs. $68.78 billion expected
Microsoft’s revenue grew 12% year over year in the quarter, which ended on Dec. 31, according to a statement. Net income of $24.11 billion was up from $21.87 billion in the same quarter a year ago.
The company’s Intelligent Cloud segment, which contains the Azure cloud, contributed $25.54 billion in revenue. That was up about 19% but below the $25.83 billion consensus among analysts polled by StreetAccount.
Revenue from Azure and other cloud services jumped 31%, down from 33% in the prior quarter.
Of the growth in the fiscal second quarter, 13 percentage points came from artificial intelligence. Microsoft does not disclose Azure revenue in dollars. Analysts polled by CNBC and StreetAccount had been looking for 31.9% and 31.1% growth, respectively.
Microsoft’s Productivity and Business Processes segment that includes Office productivity software subscriptions and LinkedIn posted $29.44 billion in revenue. That was up 13.9% and more than StreetAccount’s $28.89 billion consensus.
The More Personal Computing unit that includes Windows, Bing, Surface and Xbox delivered $14.65 billion in revenue. The number was flat year over year and higher than the StreetAccount consensus of $14.29 billion.
During the fiscal second quarter, Microsoft announced the Windows 365 Cloud Link, a PC that corporate workers can use to access their applications and files stored in the cloud. The company’s GitHub unit announced support for artificial intelligence models from Anthropic and Google for a programming chatbot in addition to existing support for OpenAI. Microsoft also invested an additional $750 million into OpenAI during the quarter.
Analysts might ask management why Microsoft did not participate in a Jan. 21 White House press conference for the Stargate AI infrastructure project involving OpenAI that could attract up to $500 billion in investment.
Microsoft shares slipped 2% on Monday as investors considered the implications of AI models from DeepSeek, a Chinese lab. DeepSeek in December introduced an open-source model that the lab said it trained for $5.6 million, excluding costs of data and earlier research. That would make it more efficient than models from major U.S. companies. And last week, DeepSeek said its newest model, R1, outperformed OpenAI’s in some tests.
“We should take the developments out of China very, very seriously,” Microsoft CEO Satya Nadella said Jan. 22. Nadella has committed to spending $80 billion on AI infrastructure in the current fiscal year.
Microsoft shares are up 6% in 2025, while the S&P 500 index has gained 3% in the same period.
Executives will discuss the quarterly results with analysts and issue guidance on a conference call starting at 5:30 p.m. ET.
This is breaking news. Please check back for updates.
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