Microsoft shares drop as cloud miss overshadows better-than-expected revenue and earnings

Microsoft
shares
fell
as
much
as
7%
in
extended
trading
on
Tuesday
as
investors
looked
past
better-than-expected
earnings
and
revenue
and
focused
instead
on
disappointing
cloud
results.
But
executives
provided
a
dose
of
optimism
when
they
predicted
a
cloud
growth
speed-up
in
the
first
half
of
2025.

Here’s
how
the
company
did,
compared
with
the
LSEG
consensus:

• 
  Earnings
  per
  share:
  $2.95
  vs.
  $2.93
  expected
• 
  Revenue:
  $64.73
  billion
  vs.
  $64.39
  billion
  expected

Microsoft’s
revenue
increased
15%
year
over
year
in
the
fiscal
fourth
quarter,
which
ended
on
June
30,
according
to
a

statement.
Net
income,
at
$22.04
billion,
was
up
from
$20.08
billion,
or
$2.69
per
share,
in
the
year-ago
quarter.

With
respect
to
guidance,
Microsoft
called
for
fiscal
first-quarter
revenue
between
$63.8
billion
and
$64.8
billion,
implying
13.8%
growth
at
the
middle
of
the
range.
Analysts
polled
by
LSEG
were
looking
for
$65.24
billion
in
revenue.
The
forecast
included
$15.25
billion
in
operating
expenses
at
the
middle
of
the
range,
under
the
StreetAccount
consensus
of
$16.10
billion.

The
company’s
top
segment,
Intelligent
Cloud,
generated
$28.52
billion
in
revenue.
It
includes
the
Azure
public
cloud,
Windows
Server,
Nuance
and
GitHub.
The
total
was
up
about
19%
and
below
the
$28.68
billion
consensus
among
analysts
surveyed
by
StreetAccount.
GitHub’s
revenue
is
now
at
an
annual
run
rate
exceeding
$2
billion,
Microsoft
CEO
Satya
Nadella
said
on
a
conference
call
with
analysts.

Revenue
from
Azure
and
other
cloud
services
grew
29%
during
the
quarter.
Analysts
polled
by
CNBC
and
StreetAccount
had
expected
31%
growth.
Microsoft’s
Azure
number
hadn’t
fallen
short
of
consensus
since
2022.
The
tech
giant
doesn’t
disclose
revenue
from
the
category
in
dollars.

Last
week,
Google
parent


Alphabet
said
revenue
from
its
cloud
business,
encompassing
Workspace
productivity
software
and
Google
Cloud
Platform
infrastructure,
went
up
by
about
29%. 

Microsoft’s
cloud
unit
is
of
particular
importance
to
Wall
Street,
as
the
company
is
battling
with


Amazon
Web
Services
and
Google
for
artificial
intelligence
workloads.
All
three
companies
are
investing
heavily
to
boost
AI
capabilities
and
to
try
and
lure
startups
and
big
companies
as
generative
AI
models
rapidly
advance.
For
Amazon,
AWS
has
been
a
critical
source
of
profit
for
a
decade.

Of
the
29%
growth
for
Azure
and
other
cloud
services,
8
percentage
points
came
from
AI
services,
Microsoft
said.

“Our
share
gains
accelerated
this
year
driven
by
AI,”
Nadella
said.
But
demand
for
Azure
AI
services
remained
higher
than
available
capacity,
said
Amy
Hood,
Microsoft’s
finance
chief.
The
company
pointed
to
that
trend

in
April.
She
said
Azure
growth
in
June
was
slightly
lower
than
expected
across
some
parts
of
Europe.

Microsoft
sees
fiscal
first-quarter
Azure
revenue
growth
between
28%
and
29%
at
constant
currency
in
the
fiscal
second
quarter,
with
faster
growth
in
the
second
half
of
the
fiscal
year,
Hood
said.
Analysts
polled
by
StreetAccount
were
looking
for
fiscal
second-quarter
revenue
growth
of
30.6%
for
Azure.

The
Productivity
and
Business
Processes
unit
that
includes
Office
software
and
LinkedIn
produced
$20.32
billion
in
revenue.
That’s
up
11%
and
more
than
the
$20.13
billion
StreetAccount
consensus.

Microsoft’s
More
Personal
Computing
unit,
with
the
Windows
operating
system,
gaming,
devices
and
search
advertising,
contributed
$15.90
billion
in
revenue.
That
outcome
is
up
14%
and
higher
than
the
StreetAccount
consensus
of
$15.49
billion.

The
results
benefited
from
a
solidifying
PC
market.
Sales
of
Windows
licenses
to
device
makers
were
up
4%.
Technology
industry
researcher
Gartner
estimated
that
PC
shipments
during
the
fiscal
fourth
quarter
increased
1.9%,
up
from
0.9%
growth
in
the
prior
quarter.

In
gaming,
Microsoft
now
has
over
500
million
monthly
active
users,
including
various
consoles,
PCs
and
mobile
devices
following
the
Activision
Blizzard
acquisition
that

closed
in
October,
Nadella
said.

During
the
fiscal
fourth
quarter,
Microsoft
started
selling

Surface
PCs
with
AI
features
that
can
run
certain
models
locally
without
the
need
for
an
internet
connection.
Dell,
HP
and
other
device
makers
also
touted
their
own
so-called
Copilot+
PCs.

Nadella
said
at
a
press
briefing
in
May
that
“we’re
bringing
real
joy
and
a
sense
of
wonder
back
to
creation
on
the
PC.”

Excluding
the
after-hours
move,
Microsoft
stock
is
up
12%
year
to
date,
while
the
S&P
500
gained
13%
over
the
same
period.