Microsoft Corp (NASDAQ:MSFT) reported stronger-than-expected first-quarter earnings on Wednesday, driven by cloud and AI growth, but shares fell in after-hours trading as investors pondered slowing Azure revenue growth.
Azure and other cloud services were up 40% year-on-year, which was slightly below Wall Street expectations and pressured shares despite the overall strong results. Microsoft Cloud overall generated $49.1 billion, up 26% from last year.
The software giant posted revenue of $77.7 billion, up 18% from a year earlier and above analysts’ estimate of $75.3 billion. GAAP earnings per share rose 13% to $3.72, beating the Street’s forecast of $3.67. Operating income climbed 24% to $38 billion.
Productivity and Business Processes revenue, including Microsoft 365 and Dynamics 365, rose 17% to $33 billion. Commercial cloud subscriptions for Microsoft 365 climbed 17%, while consumer cloud subscriptions jumped 26%. LinkedIn revenue increased 10% and Dynamics 365 revenue grew 18%.
The More Personal Computing segment, which includes Windows, Surface devices, and gaming, generated $13.8 billion, up 4% from a year ago, surpassing estimates of $12.8 billion. Windows OEM and devices sales rose 6%, while Xbox content and services inched up 1%. Search and news advertising revenue, excluding traffic acquisition costs, grew 16%.
Microsoft highlighted strong future revenue visibility, reporting a commercial remaining performance obligation (RPO) of $392 billion, up 51% from last year.
“Our planet-scale cloud and AI factory, together with Copilots across high-value domains, is driving broad diffusion and real-world impact,” CEO Satya Nadella said.
CFO Amy Hood added that the “strong start to the fiscal year… reflects growing customer demand for our differentiated platform.”
Shares dropped 3.6% in after-hours trading, as investors focused on Azure’s slightly softer growth compared with expectations.