Microsoft’s latest earnings report revealed a 12% increase in total revenue, reaching $69.6 billion, surpassing analysts’ expectations of $68.78 billion. However, the company’s Azure cloud platform reported a 31% revenue growth, slightly below the anticipated 31.8%. This deceleration in cloud growth, coupled with higher-than-expected capital expenditures of $22.6 billion, has raised concerns among investors, leading to a 1.3% decline in Microsoft’s share price.
Despite these challenges, Microsoft’s investments in artificial intelligence (AI) are contributing positively, accounting for 13 percentage points of Azure’s growth in the fiscal second quarter, up from 12 percentage points in the previous quarter. The company also reported a 67% increase in commercial bookings, primarily driven by a significant new Azure contract with OpenAI.
Looking ahead, Microsoft anticipates double-digit revenue growth in fiscal 2025, with cloud revenue expected to grow between 28% and 29% year-over-year in the first quarter. The company is ramping up its investments in AI, with nearly all of its $19 billion capital expenditures allocated to cloud and AI infrastructure projects like data centers.
However, the emergence of competitors like DeepSeek has sparked concerns about increased competition in the AI sector, potentially impacting Microsoft’s market share and pricing strategies.
