Microsoft ( MSFT ) reported its fiscal fourth-quarter earnings on Tuesday, beating on the top and bottom lines, but missing cloud revenue expectations, sending the software giant’s shares lower following the report.
For the quarter, Microsoft reported earnings per share (EPS) of $2.95 on revenue of $64.7 billion. Wall Street had expected EPS of $2.94 on revenue of $64.5 billion, according to data compiled by Bloomberg. Microsoft had EPS of $2.69 on revenue of $56.2 billion during the same period last year.
Microsoft’s overall cloud revenue of $36.8 billion came in at $36.8 billion, but the company’s Intelligent Cloud revenue, which includes its Azure services, came in at $28.5 billion versus $28.7 billion expected.
Microsoft shares fell more than 7% in after-market trading.
While Microsoft’s cloud business missed expectations, overall revenue rose 21% year over year. Intelligent cloud revenue, meanwhile, grew 19% year over year. What’s more, Microsoft said AI services contributed 8 percent growth to its Azure and other cloud services revenue, up 29%.
Microsoft’s AI miss sent shares of fellow AI-heavy companies like Meta lower in after-hours trading. More than 3% of the message on the social media giant is muted.
The report follows rival and Google parent Alphabet’s ( GOOG , GOOGL ) earnings announcement last week, during which the company said it saw a partial increase in cloud revenue due to interest in AI products.
However, Google did not provide specific numbers on the impact of AI on its cloud business, with some analysts such as Stephen Zhu of UBS Global Research predicting that revenue benefits from the company’s AI spending may not arrive until the first half of 2025. .
According to UBS Global Research analyst Carl Keirstedt, Microsoft is also taking more market share away from Google and Amazon.
“The most consistent theme in this round of audits was the number of customers and partners citing share gains as a result of Microsoft’s early lead on the AI front, based on share shifts between AWS, Microsoft Azure and Google Cloud,” Keirstead wrote in a recent note about the three major cloud players.
“This has been a recurring theme from checks over the last 6-12 months and the comments about Azure’s relative strength are consistent with previous checks,” he added.
During Alphabet’s earnings call, CFO Ruth Porat said the company spent $13 billion on capital expenditures, up from $12 billion in the previous quarter, and that much of that spending was going toward AI.
Amazon ( AMZN ) is scheduled to report earnings on August 1.
Google shares are up 22% year to date, while Amazon shares are up 23%.
Email Daniel Hawley at [email protected]. Follow him on Twitter @Daniel Hawley.
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