Microsoft’s Earnings Report: A Mixed Bag
Strong Revenue Growth, But Forecast Falls Short
Microsoft’s latest earnings report brought a mix of good and bad news for investors. While the tech giant’s revenue exceeded expectations, its forecast for the current period fell short, leading to a sharp decline in its stock price.
Revenue Beats Estimates, But Forecast Disappoints
For the period ending in December, Microsoft reported revenue of $65.59 billion, a 16% increase from the previous year and above the average analyst estimate of $64.51 billion. Earnings per share of $3.30 also topped the $3.10 average estimate. However, the company’s forecast for the current period, with revenue expected to range from $68.1 billion to $69.1 billion, was below analyst expectations of $69.83 billion.
Azure Cloud Infrastructure Sees Impressive Growth
One bright spot in the report was the performance of Microsoft’s cloud infrastructure business, Azure, which saw revenue increase by 33%. CFO Amy Hood noted that growth in constant currency will come in at 31% to 32% in the fiscal second quarter.
Supply Chain Issues Impact Demand
However, outside suppliers are late in delivering data center infrastructure to Microsoft, which means the company won’t be able to meet demand in the fiscal second quarter. CEO Satya Nadella expressed optimism that the supply-demand gap will narrow in the second half of the fiscal year.
AI Investments Take Center Stage
Microsoft’s investments in artificial intelligence continue to be a major focus for investors. The company has invested close to $14 billion in OpenAI, which was valued at $157 billion in a recent financing round. While this investment is expected to take a $1.5 billion hit to income in the current period, it’s seen as a key area of growth for the company.
Stock Price Takes a Hit
Despite the strong revenue growth, Microsoft’s stock price fell more than 5% on Thursday, its worst day since October 2022. As of mid-day Thursday, Microsoft shares were up around 9% for the year, lagging behind the Nasdaq’s 21% gain during the same period.
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