Microsoft Q2 cloud revenue falls short of expectations, sending stock lower

Published On Jan 29, 2025, 4:08 PM

Microsoft's Q2 earnings report revealed a mixed performance: while the company exceeded earnings and revenue expectations overall, its cloud segment, particularly the Intelligent Cloud, fell short of analysts' estimates. The Commercial Cloud revenue grew by 21% year-over-year to $40 billion but did not meet the projected $41.1 billion. Azure revenue was reported at $25.5 billion, missing the expected $25.8 billion. Microsoft attributed some growth in Azure to AI services, but the gross margin declined to 70%. CEO Satya Nadella emphasized the importance of AI investments, with plans to invest $80 billion in data centers in fiscal 2025. This weaker cloud performance has raised concerns about the company's future in the competitive AI market.