Microsoft beats revenue forecasts but poor performance of cloud services drags share price

Microsoft outperformed analyst predictions in its latest quarterly earnings report, revealing on Tuesday that its revenue was up 15% year-over-year. But growth of the company’s closely watched Azure cloud computing services failed to meet expectations and shares in Microsoft fell as much as 7% in after-hours trading.

The company was expected to report steady growth in its fourth quarter earnings report, mostly on the back of its cloud services. Revenue from those services grew 29%, lower than the 30% to 31% that analysts predicted , resulting in a sell-off that exacerbates big tech’s recent market woes .

In Microsoft’s earnings report , Satya Nadella, the CEO, sought to bolster confidence in the company’s performance.

“Our strong performance this fiscal year speaks both to our innovation and to the trust customers continue to place in Microsoft,” said Nadella in the earnings statement. “As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era.”

Microsoft has invested billions in artificial intelligence in recent years, as part of a bet that AI-enabled services will dominate the tech industry. And the company threw its weight behind ChatGPT maker OpenAI, further cementing itself as a central player in the commercialization of generative AI.

But as the dust in the AI sector settles, there are growing questions about whether big tech’s pivot to AI will be able to yield the sort of revenue boosts that these companies have touted.

Meanwhile, factors including speculation over a Federal Reserve cut to interest rates has led investors to cool their enthusiasm for big tech after a long period of optimism over AI and surging stock prices. Both Tesla and Alphabet’s share prices fell abruptly following the release of their earnings reports last week, while Microsoft’s share price has fallen from the high point it reached in early July.

Microsoft was also at the center of the global tech outage this month that grounded thousands of flights and caused billions of dollars in turmoil across industries. The cybersecurity firm CrowdStrike sparked the outage by pushing a faulty software update to Windows systems, causing them to crash en masse.

A much smaller and unrelated outage hit Microsoft’s Azure cloud service earlier on Tuesday, causing network connection issues in several countries.