Microsoft (MSFT) has announced its fiscal fourth-quarter earnings, beating both earnings per share and revenue forecasts but falling short of cloud revenue expectations. This news sent the software giant's shares tumbling in after-market trading.
For the quarter, Microsoft reported earnings per share (EPS) of $2.95 on revenue of £52.4 billion. Wall Street analysts had anticipated EPS of $2.94 on revenue of £52.1 billion, according to data compiled by Bloomberg. Compared to the same period last year, Microsoft saw a significant increase, reporting EPS of $2.69 and revenue of £45.6 billion.
Despite the overall success, Microsoft's cloud revenue, which came in at £29.8 billion, met expectations but its Intelligent Cloud revenue, encompassing its Azure services, fell short. The figure reached £23.1 billion, lagging behind the expected £23.3 billion.
Following the report, shares of Microsoft plummeted over 7% in after-hours trading.
While Microsoft's cloud business missed expectations, overall revenue still rose 21% year-on-year. Intelligent Cloud revenue, meanwhile, increased 19% year-on-year. Notably, Microsoft stated that its AI services contributed 8 percentage points of growth to its Azure and other cloud services revenue, which increased by 29%.
This AI miss sent shares of other AI-heavy companies, including Meta, down in after-hours trading. The social media giant saw its shares drop more than 3% on the news.
This report follows rival and Google parent Alphabet's (GOOG, GOOGL) earnings announcement last week, where the company reported an uptick in cloud revenue partially attributed to growing interest in AI products. However, Google did not provide specific numbers on the impact of AI on its cloud business, leading some analysts, like UBS's Stephen Ju, to predict that revenue benefits from the company's AI spending might not materialise until the first half of 2025 at the earliest.
UBS analyst Karl Keirstead highlighted that Microsoft has been gaining market share from Google and Amazon.
"In terms of share shifts among AWS, Microsoft Azure, and Google Cloud, the most consistent theme in this round of checks was the number of customers and partners that cited share gains by Microsoft resulting from its early lead on the AI front," 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 commentary about Azure's relative strength felt consistent with prior checks," he added.
During Alphabet's earnings call, CFO Ruth Porat revealed that the company spent £10.5 billion on capital expenditures, up from £10 billion in the previous quarter, noting that the majority of this spending is directed towards AI.
Amazon (AMZN) is scheduled to report its earnings on August 1.
Shares of Google have risen 22% year-to-date, while shares of Amazon have increased by 23%.
