Microsoft late Wednesday beat Wall Street's targets for its fiscal second quarter thanks to its booming artificial intelligence business. But Microsoft stock fell in extended trading on decelerating growth in its Azure cloud infrastructure unit. Microsoft also guided below views for revenue in the current quarter.
The software giant earned $3.23 a share on sales of $69.6 billion in the December quarter. Analysts polled by FactSet had expected Microsoft to earn $3.11 a share on sales of $68.9 billion. On a year-over-year basis, Microsoft's earnings rose 10% while sales increased 12%.
"We are innovating across our tech stack and helping customers unlock the full ROI (return on investment) of AI to capture the massive opportunity ahead," Chief Executive Satya Nadella said in a news release. "Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year over year."
Microsoft's Intelligent Cloud business saw revenue increase 19% to $25.5 billion in fiscal Q2. Its Productivity and Business Processes unit posted a gain of 14% to $29.4 billion. And its More Personal Computing unit was relatively unchanged with sales of $14.7 billion.
"This quarter Microsoft Cloud revenue was $40.9 billion, up 21% year over year," Chief Financial Officer Amy Hood said in a statement. "We remain committed to balancing operational discipline with continued investments in our cloud and AI infrastructure."
Azure revenue grew 31% year over year in constant currency in the December quarter, vs. 34% in the September quarter and 35% in the June quarter.
For the current quarter, Microsoft predicted Azure growth of 31% to 32% in constant currency.
Based on the midpoint of its outlook, Microsoft expects March-quarter revenue of $68.2 billion, vs. the consensus estimate of $69.8 billion. Foreign-exchange rates will be a headwind in its fiscal third quarter, Hood said.
In after-hours trading on the stock market today, Microsoft stock slid 5% to 420.36. During the regular session Wednesday, Microsoft declined 1.1% to close at 442.33.
Microsoft stock is in a 30-week consolidation pattern with a buy point of 468.35, according to IBD MarketSurge charts. But investors could see a cup base within the larger consolidation offering a 456.16 buy point, based on IBD analysis.
Microsoft stock is in the IBD Long-Term Leaders Portfolio.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
