Microsoft reported fiscal Q4 2024 earnings with a slight beat on expectations, achieving $64.7 billion in revenue and $2.95 EPS. However, shares dropped due to disappointing Azure cloud growth and lighter sales guidance for the next quarter. The company's Intelligent Cloud segment, which includes Azure, grew by 19% but fell short of expectations, affecting investor sentiment. Despite this, Microsoft remains optimistic about its AI investments and cloud infrastructure expansion.
Microsoft recently disclosed its fiscal fourth-quarter results for 2024, surpassing Wall Street's expectations slightly in terms of revenue and earnings per share. However, the company's stock experienced a decline in after-hours trading, primarily due to underwhelming growth in its Azure cloud services and a cautious outlook for the upcoming quarter. This report delves into the details of Microsoft's financial performance, the challenges and opportunities in its cloud segment, and the strategic moves it's making in the AI and cloud domains.
Microsoft announced earnings of $2.95 per share on a revenue of $64.7 billion for the fiscal fourth quarter, slightly above analyst expectations. Despite these strong results, Microsoft shares fell by up to 7% in extended trading. The drop was attributed to the slower-than-expected growth in Microsoft's Azure cloud services, which is a key area of focus for investors given the current competitive landscape in cloud computing. The company's overall cloud revenue stood at $36.8 billion, slightly below the anticipated $36.84 billion.
Microsoft continues to invest heavily in AI and cloud infrastructure, with capital expenditures significantly higher than previous quarters. These investments are aimed at bolstering Microsoft's competitiveness against major players like Amazon Web Services and Google Cloud, particularly in the area of artificial intelligence. CEO Satya Nadella emphasized the acceleration of share gains driven by AI, despite the current capacity constraints in Azure AI services. Looking ahead, Microsoft predicts an acceleration in Azure's revenue growth in the second half of the fiscal year, driven by ongoing investments and increasing demand for AI capabilities.
Despite its strong overall performance, Microsoft faces challenges in its cloud sector, particularly with Azure. The growth rate for Azure was reported at 29%, below the expected 31%. This has raised concerns among investors about Microsoft's ability to maintain its growth trajectory in the highly competitive cloud market. The company's finance chief Amy Hood noted that demand for Azure AI services remained higher than available capacity, which could be limiting growth. Additionally, Microsoft's guidance for the next quarter's Azure revenue growth is set at 28% to 29%, suggesting a cautious outlook.
Microsoft's fiscal Q4 2024 earnings highlight a complex landscape where strong overall financial performance contrasts with specific challenges in the cloud sector. Despite exceeding revenue and EPS expectations, the slower growth in Azure cloud services and cautious future revenue projections have tempered investor enthusiasm. Going forward, Microsoft's continued investments in AI and cloud infrastructure will be crucial in maintaining its competitive edge and fulfilling market expectations.