Microsoft’s (MSFT) stock is down 3% after the technology giant reported revenue for its cloud computing business unit that missed Wall Street targets.
The disappointing result for the cloud unit overshadowed what were otherwise strong financial results for what was the company’s fiscal fourth quarter.
Seattle-based Microsoft reported earnings per share (EPS) of $2.95 U.S., which exceeded the $2.93 U.S. that was forecast by analysts who cover the company.
Total revenue in the quarter came in at $64.73 billion U.S., which topped consensus expectations of $64.39 billion U.S. Sales were up 15% from a year earlier.
Despite the strong print, Microsoft’s stock fell as much as 7% in after hours trading on news that the company’s cloud computing unit earned $28.52 billion U.S. in revenue, which missed the $28.68 billion U.S. forecast on Wall Street.
Even though sales in the cloud segment fell short of expectations, they were still up 19% from a year ago. Revenue from Azure and other cloud services grew 29% year-over-year.
Microsoft’s cloud unit is important as the company is battling with Amazon Web Services (AMZN) and Google Cloud (GOOG/GOOGL) for artificial intelligence (A.I.) workloads.
Microsoft is trying to attract start-up companies and established corporations as generative A.I. models evolve.
Of the 29% growth for Azure and other cloud services, Microsoft said that eight percentage points came from A.I. services during the quarter.
In other areas of its business, Microsoft reported that its Productivity and Business Processes unit that includes Office software products earned $20.32 billion U.S., up 11% from a year ago.
The Personal Computing unit that houses the Windows operating system, gaming, devices and search advertising, saw sales of $15.90 billion U.S., up 14% from the same period of 2023.
In gaming, Microsoft now has over 500 million monthly active users from consoles, personal computers and mobile devices following last year’s Activision Blizzard acquisition
Looking ahead, Microsoft forecast revenue of $63.80 billion U.S. to $64.80 billion U.S. for the current quarter, implying 13.8% growth at the mid-range. Wall Street had been looking for $65.24 billion U.S. in revenue.
Microsoft sees Azure revenue growth of 28% to 29%, with faster growth in the first half 2025. Analysts were looking for growth of 30.6% for Azure.
Prior to today (July 31), Microsoft’s stock had risen 26% in the last 12 months to trade at $422.92 U.S. per share.
