Microsoft's (MSFT) stock fell around 4% in pre-market trading on Thursday after the company issued lower than expected revenue guidance for its cloud business Azure in the second quarter. Here are the key points:
- Microsoft reported fiscal Q1 2025 earnings per share of $3.30, beating analyst estimates of $3.10. Revenue of $65.6 billion also exceeded expectations of $64.5 billion.
- However, Microsoft said it expects revenue growth for its cloud service Azure to slow to 31-32% in Q2, down from 34% in Q1. Analysts had projected higher Azure growth around 35%.
- The disappointing Azure guidance overshadowed Microsoft's overall solid Q1 results and raised concerns about the near-term payoff from the company's massive investments in artificial intelligence (AI) services.
- Microsoft cited supply chain challenges related to data center infrastructure needed for AI workloads as the reason for the slower projected Azure growth in Q2. The company said it expects supply constraints to ease in the second half of the fiscal year.
- Analysts noted that while the Q2 Azure outlook is disappointing, the underlying trends like large deal volume indicate Microsoft remains well-positioned as a leader in AI across applications and infrastructure over the long-term.
