Investor interest in Microsoft shares may have waned in recent months, but the company posted strong financial results on Wednesday, once again showing that the AI boom is in full swing.
The party is likely to continue for Wall Street as Microsoft reports earnings for its fiscal second quarter, despite slow growth in its core cloud computing business.
Microsoft reported revenue of $81.27bn, compared to expectations of $80.32bn, and improved from the 12.3% growth recorded in the same quarter last year. Earnings were $4.14 per share, compared with expectations of $3.92.
Microsoft CEO Satya Nadella said, “We’re still in the early stages of AI proliferation, and Microsoft has already built an AI business that’s bigger than some of our biggest franchises.” “We are pushing the boundaries across our entire AI stack to bring new value to our customers and partners.”
Microsoft Shares fell 4% in extended trading Wednesday after the software maker reported slower cloud growth.
Microsoft has been one of the primary beneficiaries of the AI boom, but investor confidence in it has declined recently. Six months ago, the company reached the coveted $4 trillion market capitalization mark. Three months ago, it beat analysts’ revenue expectations by 2.9%, with revenue rising 18.4% year over year.
The four biggest AI spenders – Microsoft, Alphabet, Amazon and Meta – are expected to spend $505 billion on AI infrastructure this year alone, up from about $366 billion in 2025.
But the company’s shares fell 11% as investor concerns grew over the billions of dollars invested in AI with no returns. Despite those fears, Microsoft has exceeded Wall Street’s expectations in every quarter over the past two years.
In its last earnings report, Microsoft said orders booked by its Azure cloud-computing business, which includes AI, were “significantly” higher than capacity. That unit’s revenue was projected to rise 38% from a year earlier.
On Wednesday, Microsoft said Azure revenue grew 39%, compared with a 40% increase in the fiscal first quarter.
“Microsoft Cloud revenue exceeded $50 billion this quarter, reflecting strong demand for our portfolio of services,” said Amy Hood, Microsoft’s executive vice president and chief financial officer. “We have exceeded expectations in terms of revenue, operating income and earnings per share.”
But Microsoft’s 365 Copilot AI unit faces increased competition, including Anthropic’s Cloud Cowork, a desktop AI tool that aims to act as a more accessible version of cloud code. In the fashion of circular investment deals that is now common for the industry, Anthropic is also in an exchange partnership for compute capacity.
Wedbush’s Dan Ives said this week that he sees Microsoft “as the clear front runner on the enterprise hyper-scale AI front despite growing competition from Amazon and Google”.
The most recent US productivity report shows strong gains without an increase in working hours, suggesting that the gains can be attributed to AI.
