Microsoft's Earnings Exceed Expectations But Cloud Growth Forecast Disappoints

Microsoft (MSFT) delivered fiscal first-quarter earnings that topped Street expectations, but shares fell after a warning its cloud growth could slow.

The tech titan's third-quarter revenue rose 16% year-over-year to $65.59 billion, above the analyst consensus from Visible Alpha. Net income at $24.67 billion or $3.30 per share was up from $22.29 billion or $2.99 per share a year earlier and higher than expectations. 

Microsoft's Intelligent Cloud segment, which includes its Azure cloud computing platform, led growth with revenue of $24.09 billion, up 20% as revenue from Azure and other cloud services climbed 33%. However, executives warned in the tech giant's earnings call that cloud growth could slow to between 31% and 32% in the second quarter, before picking up in the back half of the fiscal year. 

Shares of Microsoft tumbled over 5% in early trading Thursday, a day after the company's earnings call.

Microsoft's Results Come as Big Tech Faces Pressure to Show Gains From AI

Microsoft's results Wednesday came a day after Google parent Alphabet (GOOGL) beat analysts’ expectations and CEO Sundar Pichai said the company’s investments in artificial intelligence (AI) are “paying off and driving success.”

Microsoft, like Alphabet and other tech giants, has boosted its investments in AI this year to secure its position as a leader in the space, raising concerns about higher spending and whether its AI efforts will be worth the cost.

UPDATE—Oct. 31, 2024: This article has been updated to reflect additional information from Microsoft’s earnings call, and more recent share price values.

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