Microsoft Corporation, a prominent player in the technology sector, has recently experienced a notable decline in its stock value, primarily attributed to the slowdown in growth within its Azure cloud computing division. As organizations increasingly migrate their operations to cloud-based platforms, Azure has been pivotal for Microsoft’s revenue stream and overall market competitiveness. However, recent earnings reports indicate that the rapid growth phase of Azure may be stabilizing, raising concerns among investors regarding Microsoft's future profitability and market position.
The deceleration of Azure's growth can be attributed to several factors. Firstly, the cloud computing market is becoming increasingly saturated as competitors such as Amazon Web Services (AWS) and Google Cloud continue to enhance their offerings. This heightened competition has not only led to pricing pressures but also necessitated greater innovation from Microsoft to retain existing customers and attract new ones. Consequently, investors are keenly observing how effectively Microsoft can navigate this competitive landscape while sustaining its growth trajectory.
Satya Nadella said on a conference call with analysts.
Revenue from Azure and other cloud services grew 29% during the quarter. Analysts polled by CNBC and StreetAccount had expected 31% growth. Microsoft’s Azure number hadn’t fallen short of consensus since 2022. The tech giant doesn’t disclose revenue from the category in dollars.
Microsoft’s fiscal year with a bang. Microsoft’s $88.1 billion net income ($11.80 earnings per share) in its fiscal year stretching from July 2023 to June 2024 shattered last year’s previous record of $72.4 billion, while its $245.1 billion of revenue dwarfed 2023’s record $211.9 billion. The market’s reaction to Microsoft’s overall strong earnings is similar to that of Google parent Alphabet’s announcement last week, when its shares fell 5% despite a double beat.
During the fiscal fourth quarter, Microsoft started selling Surface PCs with AI features that can run certain models locally without the need for an internet connection. Dell, HP and other device makers also touted their own so-called Copilot+ PCs. Nadella said at a press briefing in May that “we’re bringing real joy and a sense of wonder back to creation on the PC.”
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