On Wednesday, January 29, during the extended trading, the value of Microsoft shares fell by as much as 5% after the technology giant released its results for the second fiscal quarter, which showed the growth of Azure cloud computing services below preliminary expectations.
Revenue of the company, which is one of the world’s largest software developers, for the fiscal quarter ended December 31 was recorded at the $69.63 billion mark. This indicator has shown growth which was 12.3% year-on-year. It is worth noting that the mentioned upward tendency is the slowest for Microsoft since mid-2023. LSEG’s preliminary estimate envisaged that the technology giant’s revenue for the specified period would be $68.78 billion.
Microsoft’s net income for the second fiscal quarter was recorded at the $24.11 billion mark. A year earlier, the corresponding figure was $21.87 billion for the same period.
Microsoft’s earnings per share were fixed at $3.23 for the second fiscal quarter. LSEG’s preliminary estimate was that this figure would be $3.11.
The Intelligent Cloud segment, which contains the Azure cloud, generated revenue of $25.54 billion in the second fiscal quarter. This indicator increased by about 19% year-on-year. At the same time, analysts surveyed by StreetAccount predicted that the mentioned segment of the technology giant’s business would generate revenue of $25.83 billion over the specified period.
It is worth noting that the financial result of Azure and other cloud services of the company jumped 31%, down from 33% in the prior quarter.
Microsoft chief executive officer Satya Nadella said that the technology giant’s annual revenue from artificial intelligence currently stands at $13 billion.
Of the company’s growth in the fiscal second quarter, 13% came from AI. The technology giant does not disclose Azure revenue in dollars. Analysts surveyed by media and StreetAccount expected growth of 31.9% and 31.1%, respectively.
Microsoft’s Productivity and Business Processes segment that includes Office productivity software subscriptions and LinkedIn generated revenue of $29.44 billion in the second fiscal quarter. This indicator grew by 13.9% year-on-year. StreetAccount’s forecast stipulated that the mentioned figure would amount to $28.89 billion.
The company’s More Personal Computing unit which includes Windows, Bing, Surface, and Xbox generated revenue of $14.65 billion in the second fiscal quarter. This indicator has not changed year-on-year. StreetAccount’s forecast stipulated that the revenue of the mentioned segment of the technology giant’s activities would amount to $14.29 billion.
Sales of devices and of Windows operating system licenses from device makers increased by 4% in the second fiscal quarter.
The technology giant also reported that its capital expenditures for the second fiscal quarter amounted to $15.8 billion. It is worth noting that finance leases are not taken into account in this case. Analysts polled by Visible Alpha are convinced that the mentioned figure is $15.7 billion.
In the Other Expenses line item, Microsoft has $2.29 billion. In October, Amy Hood, the company’s finance chief, predicted that the mentioned figure would be $1.5 billion. This projection took into account Microsoft’s share of OpenAI’s expected losses. The technology giant has invested almost $14 billion in the mentioned startup.
In the second fiscal quarter, the company announced the Windows 365 Cloud Link, a personal computer that corporate workers can use to access their apps and files stored in the cloud. Microsoft’s GitHub unit announced support for artificial intelligence models from Anthropic and Google for a programming chatbot in addition to existing support for OpenAI. Also during the last fiscal quarter, the technology giant invested an additional $750 million in OpenAI.
On Monday, January 27, the value of Microsoft shares fell by 2%. The corresponding dynamic was recorded at the moment when investors considered the implications of artificial intelligence models developed by DeepSeek, a Chinese AI laboratory. In December, the mentioned brand released an open-source machine intelligence model. DeepSeek stated that $5.6 million was spent on the development of the mentioned virtual product. It is worth noting that this indicator does not include the costs of data and earlier research. Last week, DeepSeek claimed that its latest R1 model outperformed OpenAI in some tests. Virtual products of a Chinese AI developer have become one of the most discussed topics in the world’s information space. The example of DeppSeek can gradually transform into something like a fundamental precedent for the entire global artificial intelligence industry. The success of the Chinese brand has challenged the dominance of US companies in the area of machine intelligence. Also, the example of DeepSeek casts doubt on the need for huge amounts of investment in the development of artificial intelligence. It is worth noting that the mentioned aspects and the potential consequences of the success of the Chinese brand in the future may have a certain impact on the activities of many technology giants, including Microsoft, which close cooperation with OpenAI is unequivocal evidence of the company’s commitment under the leadership of Satya Nadella to actively participate in the evolution of the AI industry.
Last week, Mr. Nadella stated the need to take the developments out of China very seriously. He also has committed to spending $80 billion on artificial intelligence infrastructure in the current fiscal year. This is another example of the importance of AI as an advanced technology of modernity. Artificial intelligence has already demonstrated impressive abilities, including those related to the high-precision processing of huge amounts of information, and has great potential which among other things, does not exclude the possibility that AI will become smarter than humans at some point.
It is worth noting that before Microsoft published information about its earnings, the value of the company’s shares had increased by 5% since the beginning of January. Over the same period, the S&P 500 index rose by about 3%.
As we have reported earlier, Donald Trump Says Microsoft Looks to Take Control of TikTok.
