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