Microsoft Corp. released its earnings for the second quarter of fiscal year 2025, ended December 31, 2024. Overall, revenue and profits exceeded Wall Street expectations, although cloud revenue slightly missed forecasts. Cloud-related factors are driving the company's after-hours stock reaction. Shares are down as much as 5%, also dragging down Amazon, which has a similar cloud business to Microsoft, by more than 1%. Key growth driver for Microsoft was the strong growth in the artificial intelligence segment.
Key Data:
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Open account Try demo Download mobile app Download mobile app- Revenue: $69.6 billion (up 12%), above consensus of $68.81 billion.
- Operating Income: $31.7 billion (up 17%).
- Net Income: $24.1 billion (up 10%).
- EPS: $3.23 (up 10%), beating expectations of $3.11.
- Microsoft Cloud Revenue: $40.9 billion (up 21%), missing expectations of $41.1 billion.
- Intelligent Cloud Revenue: $25.5 billion (up 19%), missing expectations of $25.89 billion.
- Azure and Other Cloud Services Revenue: Up 31% (ex-FX), in line with expectations.
- Productivity and Business Processes Revenue: $29.4 billion (up 14%).
- More Personal Computing Revenue: $14.7 billion (flat).
- AI Revenue: Exceeded $13 billion annual run rate, up 175% year-over-year.
Management Commentary:
- CEO Satya Nadella: "We are innovating across our products and helping customers unlock the full return on their AI investments (...). Already, our AI business has exceeded a $13 billion annual revenue run rate, up 175% year-over-year."
- CFO Amy Hood: "This quarter, Microsoft Cloud revenue was $40.9 billion, up 21% year-over-year. We remain committed to balancing operational discipline with continued investments in our cloud and AI infrastructure."
Microsoft delivered solid results, driven primarily by strong growth in the artificial intelligence segment. AI is important, but of course, given recent events surrounding DeepSeek, further such dynamic growth in this segment is in question. Therefore, disappointment from the cloud perspective (albeit still with strong growth), is causing a price decline. The company emphasizes its commitment to further investment in this area.
The company's stock has been in consolidation since August. With a decline during tomorrow's session of about 5%, the company may find itself at its lowest level since mid-January and at the same time even above 10% from its historic highs of July 2024. As you can see, the company has been doing worse in recent months compared to the growth of the Nasdaq (US100).
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