Investor interest in Microsoft Shares may have weakened in recent months, but the company reported strong financial results on Wednesday that demonstrate once again that the AI boom continues.
Microsoft reported fiscal second-quarter results that are likely to keep Wall Street partying, despite slowing growth in its key cloud computing business.
Microsoft reported revenue of $81.27 billion versus expectations of $80.32 billion, an improvement from the 12.3% increase in the same quarter last year. Earnings came in at $4.14 per share, compared with expectations of $3.92.
“We are only in the early days of AI diffusion, and Microsoft has already built an AI business that is larger than some of our largest franchises,” said the company’s CEO, Satya Nadella. “We are pushing the boundaries of our entire AI stack to drive new value for our customers and partners. »
Microsoft Shares fell 4% in extended trading Wednesday after the software maker reported slowing cloud growth.
Microsoft has been a major beneficiary of the AI boom, but investor confidence has declined recently. Six months ago, the company reached the vaunted milestone of a $4 trillion market capitalization. Three months ago, it beat analysts’ expectations by 2.9%, reporting revenue up 18.4% year-over-year.
The four biggest spenders on AI – Microsoft, Alphabet, Amazon and Meta – are expected to spend $505 billion on AI infrastructure this year alone, up from around $366 billion in 2025.
But the company’s shares have fallen 11% since then, as investor concerns about billions being pumped into AI without a corresponding return have grown. Despite these fears, Microsoft has exceeded Wall Street expectations in every quarter for the past two years.
In its latest earnings report, Microsoft said orders booked by its AI-embedded Azure cloud computing business were “significantly” exceeding its capacity. Revenue from this unit is expected to increase 38% from the previous year.
On Wednesday, Microsoft reported that Azure revenue grew 39%, compared to 40% growth in the fiscal first quarter.
“Microsoft Cloud revenue exceeded $50 billion this quarter, reflecting strong demand for our portfolio of services,” said Amy Hood, executive vice president and chief financial officer, Microsoft. “We exceeded expectations in terms of revenue, operating profit and earnings per share.”
When asked about Azure ROI, Hood said it’s best to think of it as “an allocated capacity guide to what we can deliver in terms of Azure revenue.”
While Microsoft is spending massive capital on computing capacity, she said, “we’re really making long-term decisions,” pointing to increased sales and usage of its AI products. “Then we make sure we invest in the long-term nature of R&D and product innovation.”
But Microsoft’s 365 Copilot AI unit is facing increased competition, including from Anthropic’s Claude Cowork, a desktop AI tool meant to act as a more accessible version of Claude Code.
Wedbush’s Dan Ives said this week that he sees Microsoft “as the clear leader on the large-scale AI front for businesses, despite growing competition from Amazon and Google.”
The latest US productivity report showed strong gains without increases in working hours, suggesting the gains could be attributed to AI.