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TechJul 31, 2024

Microsoft’s Cloud Revenue Falls Short, Overshadowing An Otherwise Strong Quarter for the Tech Giant

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Noah Weidner

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You’d think double-digit growth would be enough to satiate tech investors, but for Microsoft, a 15% year-over-year (YoY) revenue increase wasn’t enough to keep its stock from dipping. On Wednesday, shares fell as its closely-watched Intelligent Cloud and Azure Cloud segments missed analysts’ estimates, dimming an otherwise bright quarterly performance. Making matters worse, the company lowered its outlook for the coming quarter.

Azure and other cloud services grew 29% YoY, slightly below the 30% expected by analysts. This is the first time since 2022 that Microsoft’s cloud growth didn’t surpass estimates.
The company’s Intelligent Cloud segment missed analysts’ consensus revenue estimates, coming in at $28.52B (+19% YoY).

Forward-looking: Microsoft’s cloud shortfall overshadowed a 61% acceleration in its Xbox revenue, plus a 19% rise in search and news advertising revenue — both near-records for the divisions. Despite this, cloud and AI revenue remains the star of the show. Microsoft notes that nearly a third of its Azure growth was driven by AI, with big-name brands like TikTok representing up to a quarter of its revenue. This means full speed ahead, especially as competitors like Google and Amazon continue pouring money into AI — even with the industry’s prospects feeling a little more dreary.