Microsoft's Q2 Earnings: Cloud Revenue Miss Overshadows AI Growth
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Microsoft Stock Slips as Intelligent Cloud Revenue Falls Short of Expectations
Microsoft (MSFT) shares moved lower after the close Wednesday as the tech giant reported fiscal second-quarter Intelligent Cloud revenue that missed analysts' expectations. The company saw revenue rise 12% year-over-year to $69.63 billion, surpassing the analyst consensus from Visible Alpha. Earnings came in at $24.11 billion, or $3.23 per share, compared to $21.87 billion, or $2.93 per share, a year earlier. That was also above expectations for the quarter ended Dec. 31. However, revenue from Microsoft's Intelligent Cloud segment, which includes its Azure cloud computing platform, slightly missing projections, rising 19% to $25.54 billion. Total Azure revenue for the quarter approached $41 billion, the company said. Shares of Microsoft fell less than 2% in extended trading Wednesday. The stock, which also rose during today's regular session, had gained about 5% so far in 2025 through Wednesday's close. CEO Satya Nadella said in a statement that Microsoft's AI revenue run rate rose to $13 billion. The results come with Microsoft-backed OpenAI in focus this week after the surging popularity of an app from Chinese startup DeepSeek, which runs on an AI model it claimed can perform on par with American rivals at a fraction of the cost, raised concerns about the competitiveness of U.S. firms and their spending. Raymond James and Bank of America analysts said that DeepSeek's advances could push Microsoft, along with Alphabet's (GOOGL) Google and Amazon (AMZN), to act with greater urgency. OpenAI is also involved with Stargate, an AI infrastructure-building joint venture with Oracle (ORCL) and SoftBank announced earlier this month. The companies said they would commit $100 billion to start, and as much as $500 billion over the next four years.
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Microsoft Shares Slide After Q2 Results, Cloud Revenue Misses Expectations: Details - Microsoft (NASDAQ:MSFT)
Quarterly revenue clocks in at $69.6 billion, beating the $68.78 billion analyst consensus estimate. Microsoft Corp. MSFT reported its second-quarter financial results after Wednesday's closing bell. Here's a look at the key figures from the quarter. The Details: Microsoft reported quarterly GAAP earnings of $3.23 per share, beating the $3.11 consensus estimate. Quarterly revenue clocked in at $69.6 billion, beating the $68.78 billion analyst consensus estimate. Read Next: Robert Kennedy Jr. Faces Senate Confirmation Hearings As Bird Flu Concerns Grow: Caroline Kennedy Says Cousin 'Predator' Unfit For Office Revenue in Microsoft's Intelligent Cloud segment was $25.5 billion and increased 19%. Within Intelligent Cloud, server products and cloud services revenue increased 21% driven by Azure and other cloud services revenue growth of 31%. Revenue in the Productivity and Business Processes segment was $29.4 billion, an increase of 14%. Revenue in More Personal Computing was relatively unchanged at $14.7 billion. Microsoft's capital expenditures were $22.6 billion in the second quarter. "We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead," said Satya Nadella, CEO of Microsoft. "Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year." "This quarter Microsoft Cloud revenue was $40.9 billion, up 21% year-over-year," said Amy Hood, executive vice president and CFO of Microsoft. "We remain committed to balancing operational discipline with continued investments in our cloud and AI infrastructure." Microsoft will host a conference call to discuss the results and provide forward-looking guidance at 5:30 p.m. ET. MSFT Price Action: According to data from Benzinga Pro, Microsoft shares are down 1.43% after-hours at $436.32 on Wednesday. Read Next: Rigetti Computing, Quantum Stocks Soar On Project Stargate Photo: Shutterstock MSFTMicrosoft Corp$439.06-1.82%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewMarket News and Data brought to you by Benzinga APIs
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Microsoft's Q2 fiscal 2025 results show strong overall performance but a slight miss in Intelligent Cloud revenue. The company's AI business is growing rapidly, reaching a $13 billion annual revenue run rate.
Microsoft's Q2 Fiscal 2025 Performance
Microsoft Corporation (MSFT) has released its fiscal second-quarter earnings for 2025, revealing a mixed bag of results that have caused a slight dip in its stock price. The tech giant reported overall strong performance, with total revenue rising 12% year-over-year to $69.63 billion, surpassing analyst expectations
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. Earnings per share came in at $3.23, also beating projections2
.Cloud Revenue Miss
Despite the overall positive results, Microsoft's Intelligent Cloud segment, which includes its Azure cloud computing platform, fell short of expectations. Revenue in this crucial division rose 19% to $25.54 billion, slightly missing analysts' projections
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. This miss in cloud revenue appears to be the primary factor behind the after-hours stock price decline of less than 2%.AI Business Growth
CEO Satya Nadella highlighted the company's progress in artificial intelligence, stating that Microsoft's AI business has surpassed an annual revenue run rate of $13 billion, marking a significant 175% year-over-year increase
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. This rapid growth in AI-related revenue underscores Microsoft's commitment to innovation and its ability to capitalize on emerging technologies.Segment Performance
Microsoft's financial results revealed varied performance across its business segments:
- Intelligent Cloud: Revenue increased by 19% to $25.5 billion.
- Productivity and Business Processes: Revenue grew by 14% to $29.4 billion.
- More Personal Computing: Revenue remained relatively unchanged at $14.7 billion
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AI Competition and Infrastructure Investment
The earnings report comes amid increased focus on Microsoft-backed OpenAI, following the emergence of DeepSeek, a Chinese startup claiming to offer competitive AI performance at lower costs. This development has raised concerns about the competitiveness of U.S. firms and their AI investments
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.In response to growing competition, Microsoft is part of Project Stargate, an AI infrastructure-building joint venture with Oracle and SoftBank. The initiative plans to invest up to $500 billion over the next four years, demonstrating Microsoft's commitment to maintaining its edge in the AI race
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.Financial Outlook
Microsoft's CFO, Amy Hood, emphasized the company's focus on balancing operational discipline with continued investments in cloud and AI infrastructure. The Microsoft Cloud revenue reached $40.9 billion in the quarter, representing a 21% year-over-year increase
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.As Microsoft navigates the evolving tech landscape, its strong overall performance and significant AI revenue growth suggest a promising outlook, despite the slight miss in cloud revenue. The company's substantial investments in AI infrastructure and partnerships indicate its determination to remain at the forefront of technological innovation.
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