Microsoft announced its fourth-quarter earnings after the bell on Tuesday, exceeding expectations on both the top and bottom lines but falling short on estimated revenue from its intelligent cloud operations.
For the quarter, Microsoft reported earnings per share (EPS) of $2.95, slightly beating estimates of $2.94. The company brought in revenue of $64.7 billion, up from estimates of $64.5 billion. Microsoft's overall cloud revenue met expectations at $36.8 billion. However, the company's Intelligent Cloud revenue, primarily composed of its Azure services, fell short of expectations, reporting revenues of $28.5 billion versus estimates of $28.7 billion.
Still year-over-year, Intelligent Cloud revenue increased by 19%. Additionally, Microsoft reported that its AI services contributed to 8% of the 30% increase in Azure and other cloud service revenue. However, this lagged behind the estimated 31.3% growth for the quarter and showed a slight slowdown from March’s quarter growth of 31%.
During Microsoft’s earnings call, the integration of AI into the company's business to drive growth was a key focus. CEO Satya Nadella acknowledged that investments in AI are capital-intensive, with the company spending $19 billion on capital expenditures for AI data centers in the quarter. Nadella noted that Microsoft has over 60,000 Azure AI customers, a 60% year-over-year increase, with average spend per customer continuing to grow. He also highlighted several high-profile companies using their AI cloud services.
After hours, Microsoft shares were down nearly 8% at one point but later recovered to around 3% in the red. Overall, it was considered a successful quarter for Microsoft, but
the slight slowdown in Azure revenue may have concerned investors who are uncertain about whether large investments in AI will pay off for Microsoft's bottom line.
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