Microsoft’s (MSFT) stock is down 7% after the technology giant issued financial results that showed slowing growth in its cloud computing unit.
The Seattle-based company reported earnings per share (EPS) of $4.14 U.S. for its fiscal second quarter, which was ahead of the $3.97 U.S. expected on Wall Street.
Revenue in the quarter totaled $81.27 billion U.S., which was ahead of the $80.27 billion U.S. forecast among analysts. Sales were up 16.7% from a year earlier.
Despite the top and bottom-line beats, Microsoft announced that revenue from its cloud computing services grew 39%, down slightly from 40% growth in the previous quarter.
Wall Street was anticipating 39.4% growth from the company’s cloud business.
In terms of guidance, Microsoft said that it expects $80.65 billion U.S. to $81.75 billion U.S. in revenue for the current quarter. The midpoint of that range met Wall Street forecasts.
The company’s forecast for Azure cloud growth in the current quarter is 37% to 38%. Analysts had 37.1% growth penciled in.
However, Microsoft’s fiscal third-quarter operating margin is forecast to be 45.1%, below Wall Street’s 45.5% consensus outlook.
As for artificial intelligence (A.I.), Microsoft said that it now has 15 million commercial subscriptions for its Copilot digital assistant.
Copilot has room to grow as Microsoft has over 450 million paid commercial Microsoft 365 customers.
Microsoft’s capital expenditures and finance leases in the most recent quarter, which mostly go towards A.I. data centres, came to $37.5 billion U.S., up 66% from a year earlier.
That was more spending than the $34.31 billion U.S. that Wall Street had expected. However, the company said that it added nearly one gigawatt of A.I. computing capacity in fiscal Q2.
Microsoft has announced plans to raise prices for its Office software subscriptions, and A.I. startup Anthropic has said it will buy $30 billion U.S. in cloud services from the company.
Prior to today (Jan. 29), MSFT stock had risen 9% over the last year to trade at $481.63 U.S. per share.
