Shares of Microsoft (MSFT) are down after the technology giant reported Fiscal second quarter financial results that showed weak growth in its Azure cloud computing unit.
Microsoft did manage to beat Wall Street forecasts on the top and bottom lines, announcing earnings per share (EPS) of $3.23, which was ahead of the $3.11 consensus expectation of analysts. Revenue in the period of $69.63 billion topped the $68.78 billion that was anticipated. Sales were up 12% from a year earlier.
However, revenue from Azure and other cloud services increased only 31% year over year during the quarter ended Dec. 31, down from 33% growth in the previous quarter. Analysts had been looking for cloud growth of 31.9%. Of the cloud computing growth, only 13 percentage points came from artificial intelligence (AI). Microsoft does not disclose Azure revenue figures.
Elephant in the Room
Microsoft’s financial results come days after the launch of the Chinese AI app called DeepSeek, which has raised questions about the amount of money U.S. companies are spending on the technology. Microsoft has committed to spend $80 billion on AI infrastructure in the current fiscal year. Management is expected to be questioned about DeepSeek and its impacts during the company’s earnings call.
Microsoft’s Productivity and Business Processes segment that includes Office productivity software subscriptions and LinkedIn posted $29.44 billion in revenue, up 13.9% from a year ago. The Personal Computing unit that includes Windows, Bing, Surface, and Xbox delivered $14.65 billion in revenue, which was flat year over year. Sales of devices and Windows operating system licenses were up 4%.
MSFT stock has risen 9% in the past 12 months.
Is MSFT Stock a Buy?
The stock of Microsoft has a consensus Strong Buy rating among 30 Wall Street analysts. That rating is based on 27 Buy and three Hold recommendations issued in the last three months. The average price target on MSFT stock of $512.77 implies 15.92% upside from current levels. These ratings are likely to change after today’s financial results.
