Big tech AI giant Microsoft (MSFT) delivered another quarter of robust financial growth, but Q2 fails to excite investors after its core Azure cloud business hit but did beat expectations. This was a report marked by robust financial growth, but Q2 fails to excite some analysts.
The software giant reported Q2 earnings that topped Wall Street forecasts, with adjusted EPS of $4.14, ahead of the $3.93 analysts had anticipated. Revenue climbed 17% year on year to $81.3 billion, also beating consensus estimates of $80.23 billion.
| Microsoft (MSFT) | Price: $452.40 | Market cap: $3.37tn |
Despite the headline beat, Microsoft shares slid nearly 6% in after-hours trading as market attention centred on Azure’s growth rate.
Azure still strong
Revenue from the company’s cloud platform rose 39%, only marginally above analysts’ forecasts of 38.8%, easing concerns that momentum was slowing but falling short of the kind of upside surprise investors have come to expect.
Cloud operations remained the principal engine of growth. Microsoft Cloud revenue surpassed $50 billion for the quarter, while operating income increased 21% from a year earlier to $38.3 billion, reflecting continued demand for enterprise software and AI-driven services.
Optimistic Nadella
Chief executive Satya Nadella struck an optimistic tone on the company’s long-term prospects, highlighting the early stage of artificial intelligence adoption across global businesses. “We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises,” he said.
On a GAAP basis, net income surged 60% to $38.5 billion. Non-GAAP net income rose 23% to $30.9 billion, with Microsoft noting that these figures exclude the impact of its investment in OpenAI.
Investors will look to management’s earnings call for guidance on future quarters, particularly around Azure growth and capital spending tied to AI infrastructure. For now, the results underline Microsoft’s financial strength while also showing how elevated expectations for its cloud business continue to shape market reaction.
A beat on both revenue and earnings yet again, Microsoft remains one of the most reliable tech stocks money can buy. Analyst at Goldman Sachs, KeyBlanc and Piper Sandler were among those to trim price target (to $600), and that still implies 25% upside this year or so.
Microsoft has been a core holding for any portfolio for years, and so it remains.
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