Microsoft reported second-quarter results that outperformed analyst estimates on both the bottom line and top line, but investors reacted negatively after-hours when Azure cloud growth came in only marginally above forecasts.
Adjusted earnings per share were $4.14, beating the analyst estimate of $3.93. Revenue for the quarter reached $81.3 billion, above the consensus figure of $80.23 billion and up 17% from the year-ago period.
Despite the overall beat, Microsoft shares declined about 4% in after-hours trading after the company disclosed that Azure cloud revenue rose 39% year over year - a pace that narrowly exceeded analyst expectations of 38.8% rather than significantly surpassing them. Microsoft will provide guidance on its earnings conference call.
The company said Microsoft Cloud revenue topped $50 billion for the quarter, underscoring the continued strength of its cloud business. Operating income climbed 21% to $38.3 billion compared with the same quarter a year earlier.
On profitability, Microsoft reported GAAP net income of $38.5 billion, a 60% increase year over year. Non-GAAP net income rose 23% to $30.9 billion. The company noted that its non-GAAP results exclude the impact from investments in OpenAI.
Commenting on the role of artificial intelligence within the company, Satya Nadella, chairman and chief executive officer of Microsoft, said: "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."
The mixed market reaction reflects investor focus on the trajectory of cloud growth even as overall financial metrics improved. Microsoft’s scheduled earnings conference call will be the vehicle for management to provide updated guidance and additional context about forward expectations.
Summary: Microsoft delivered a quarterly earnings and revenue beat with adjusted EPS of $4.14 and revenue of $81.3 billion, while Azure revenue growth of 39% only narrowly topped analyst expectations of 38.8%, prompting a roughly 4% drop in after-hours trading. The company reported strong operating and net income gains and will discuss guidance on its conference call.