Microsoft reports strong results despite slowing Azure growth

AI business alone topped $13bn in annual revenue

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Image: Shutterstock via Dennis

Microsoft’s shares fell more than 3% in after trading hours on Wednesday following the release of fourth quarter earnings results revealing slower-than-expected growth in the cloud computing segment.

Although the company reported generally strong figures, investors were disappointed with Azure’s performance. Revenue growth for Microsoft’s flagship cloud platform slowed to 31% year-on-year, which was lower than analysts’ forecasts of 32% and down from the previous quarter’s 34%.

Total revenue was $69.6 billion, up 12% from the same period last year. Diluted earnings per share rose 10% to $3.23, while operating income rose 17% to $31.7 billion and net income rose 10% to $24.1 billion.

CEO Satya Nadella emphasised the company’s commitment to innovation across the technology stack and efforts to help customers realize the full return on investment from artificial intelligence (AI) to capitalise on the immense opportunities ahead.

Nadella also highlighted the growth of Microsoft’s AI business, which has surpassed $13 billion in annual revenue, representing a significant 175% increase over the previous year. Investors have been closely watching the competitive landscape in the AI sector, particularly the rise of rivals such as DeepSeek, as well as concerns about the momentum of cloud growth.

Despite Microsoft’s cloud segment revenue rising to $25.5 billion, representing a 19% year-on-year increase, some analysts pointed out that expectations had been higher, especially given the rapid expansion of AI-driven workloads.

Microsoft’s productivity and business processes segment, which includes products such as Office and LinkedIn, generated $29.4 billion in revenue, a growth of 14%. Revenue from More Personal Computing, which includes Windows and Xbox, remained relatively stable at $14.7 billion. After initial disappointment with the cloud, Microsoft shares recovered slightly, trading about 1% below the closing price on Wednesday.

Business AM

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