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31/07/24
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Microsoft Stock Lower on Cloud Growth Missing Estimates
Microsoft shares dropped after its cloud revenue growth for the fourth quarter was less than Wall Street estimates although the firm increased spending on investments to bolster growth.
Microsoft Corporation dropped about 1.7% after the market open on Wednesday.
The company reported revenue of $64.7B and earnings per share of $2.95. Analysts expected revenue of $64.38B and EPS of $2.94.
Microsoft’s cloud business, Azure, grew by 29%, less than estimates of 30.2%. That was also less than the 31% growth seen in the third quarter. Azure is generally seen as a barometer for AI demand. Around 8% of Azure’s total growth was due to AI-related growth, higher than the 7% in the third quarter.
Indications of cloud growth slowing came even as Microsoft continues ramping up investments. Capital spending jumped to $19B in the fourth quarter, up from $14B in the third quarter, and nearly twice the $10.7B seen in the fourth quarter the prior year.
Jefferies analysts reiterated a Top Pick rating on Microsoft despite the miss, and said the company was still in pole position for the AI race.
They also noted Microsoft expected Azure’s growth in 2H to accelerate as more capacity is brought online to cater for AI demand.
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