Microsoft Corp (NASDAQ:MSFT) shares fell more than 3% after the bell Wednesday on slower-than-anticipated growth in its cloud segment.
Despite the overall strong results, investors were disappointed with Microsoft’s Azure cloud business, where revenue growth in constant currency slowed to 31% year-over-year, missing analysts’ estimates of 32% and down from 34% in the prior quarter. Microsoft Cloud revenue reached $40.9 billion, up 21% from a year earlier.
The tech giant reported revenue of $69.6 billion, up 12% year-over-year, while diluted earnings per share rose 10% to $3.23.
Operating income grew 17% to $31.7 billion, and net income climbed 10% to $24.1 billion.
"We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead," CEO Satya Nadella said in a statement, adding that the company's AI business had surpassed an annual revenue run rate of $13 billion, up 175% from last year.
Investors have been on edge about mounting competition in the AI space, particularly from DeepSeek, as well as concerns about cloud growth momentum. While Microsoft’s cloud segment revenue rose 19% to $25.5 billion, some analysts noted that expectations were higher, particularly given the rapid expansion of AI-driven workloads.
Microsoft’s Productivity and Business Processes segment, which includes Office and LinkedIn, generated $29.4 billion in revenue, up 14%, while revenue from More Personal Computing, which houses Windows and Xbox, was $14.7 billion, remaining relatively flat.
Shares stabilized somewhat following the cloud disappointment to trade around 1% under Microsoft's closing price Wednesday.