Microsoft Misses Q2 Expectations Despite 15% Increase in Revenue

July 31, 2024 at 8:51:16 AM

TL;DR Microsoft’s cloud and AI services division fell below analysts’ expectations despite reporting $64.7 billion in Q2 revenue, a 15% year-over-year increase. Shares dropped over 3% post-trading. Azure's 29% growth lagged market predictions. Nvidia benefits from generative AI models like ChatGPT. Microsoft invested billions in OpenAI and over $15 billion in AI globally. The personal computer division saw a 14% revenue rise, while device sales fell.

Microsoft Misses Q2 Expectations Despite 15% Increase in Revenue

Microsoft reported $64.7 billion in revenue for Q2, a 15% year-over-year increase, and generated $22 billion in profits, up 10%. Despite these strong figures, shares fell over 3% post-trading due to underperformance in its cloud and AI services division, which did not meet analysts' expectations.

Cloud and AI Services

Azure: Microsoft's cloud platform grew by 29%, falling short of market predictions.
Generative AI: Microsoft has heavily invested in OpenAI, the creator of ChatGPT, positioning itself as a leader in the AI revolution.
Capital Expenditures: CFO Amy Hood mentioned that demand for AI is outpacing current capabilities, leading to significant increases in capital expenditures.

Global AI Investments

Microsoft announced over $15 billion in AI investments globally, focusing on building the necessary energy and technical infrastructure.

Personal Computing Division

Revenue: The division reported nearly $16 billion in revenue, a 14% increase, driven by Windows OS and Xbox sales.
Device Sales: Device sales decreased by 11% after a challenging year.
AI PCs: The company is banking on "AI PCs" with generative AI capabilities integrated into Windows to drive future growth.

Despite better-than-expected results, Microsoft's stock fell, mirroring a similar reaction to Google's recent earnings report, where higher-than-expected spending led to a drop in share prices.