Microsoft stock drops over 6% after results fall short in AI disappointment
Microsoft's stock fell over 6% after its earnings report, missing cloud revenue targets despite beating overall expectations. AI services contributed to growth, but shares dropped further in after-hours trading.
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Microsoft's stock fell over 6% following its fiscal fourth quarter earnings report, which, while beating overall revenue and earnings expectations, missed specific cloud revenue targets. The company reported earnings per share (EPS) of $2.95 on revenue of $64.7 billion, slightly above Wall Street's expectations of $2.94 EPS and $64.5 billion in revenue. However, its Intelligent Cloud revenue, which includes Azure services, came in at $28.5 billion, below the anticipated $28.7 billion. Despite this, overall cloud revenue was in line with expectations at $36.8 billion, and the company noted that AI services contributed significantly to its growth.
In after-hours trading, Microsoft shares dropped more than 7%, impacting other AI-focused companies like Meta, which also saw a decline. Analysts noted that Microsoft has been gaining market share from competitors like Google and Amazon, attributed to its early advancements in AI. UBS analysts highlighted that many customers reported increased engagement with Microsoft’s Azure services, reinforcing its competitive position in the cloud market.
The earnings report follows Alphabet's recent announcement, which indicated a rise in cloud revenue due to AI interest, although it did not provide specific figures. As Microsoft navigates these challenges, it remains a key player in the cloud sector, with ongoing investments in AI expected to shape its future performance.
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14 commentsAs with all AI so far, still lacking to see the "why". Microsoft came out hard, but still don't see why other than generating potentially very wrong information or goofy looking pictures.
> $28.5 billion versus expectations of $28.7 billion.
At the scale of MS, that is a dozen or so missed large contracts out of thousands they likely signed. It is hardly the end of the world.
I am more curious about how they are going to get away with constantly giving copilot branded AI features away as part of the core OS.
> For the quarter, Microsoft reported earnings per share (EPS) of $2.95 on revenue of $64.7 billion. Wall Street was anticipating EPS of $2.94 on revenue of $64.5 billion, according to data compiled by Bloomberg.
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