On Tuesday, Eastern Time, Microsoft released its fourth quarter financial report as of June 30th. The financial report shows that the quarterly revenue growth rate of its Azure cloud platform is lower than expected, and capital expenditures for the 2025 fiscal year starting from early July will continue to increase.
As Wall Street is increasingly concerned about the returns on AI investments in large tech stocks, Microsoft's financial report further suggests that the return on investment in artificial intelligence may take longer than initially thought, further shaking the confidence of Wall Street investors.
After the company announced its spending forecast on the earnings conference call, its stock price fell 7% after hours. But after the company stated that Azure's growth would accelerate in the second half of the 2025 fiscal year, the stock price decline quickly narrowed, ultimately falling by 2.7%.
Microsoft's stock price experiences significant post market volatility
Microsoft's AI business growth rate is not satisfactory
Due to its extensive business scope, Microsoft is regarded as a leader in the technology industry, and its financial report also serves as a barometer for the US tech industry.
The company stated that in the fourth quarter ending on June 30th,
The company's operating revenue increased by 15% year-on-year to 64.7 billion US dollars. According to LSEG data, analysts had previously estimated it to be $64.39 billion.
The company's operating profit was 27.93 billion US dollars, a year-on-year increase of 15%, and analysts expected 27.63 billion US dollars.
The company's net profit was 22 billion US dollars, a year-on-year increase of 10%, compared to a year-on-year increase of 20% in the previous fiscal quarter.
Diluted earnings per share (EPS) were $2.95, a year-on-year increase of 10%, and analysts expected $2.93, a year-on-year increase of 20% in the previous quarter.
Although the revenue and profit performance of the financial report exceeded market expectations, the company's growth in AI was not satisfactory.
In the fourth quarter ending June 30th, Azure's revenue increased by 29% year-on-year, lower than the expected 30.6%.
The company expects Azure to grow by 28% to 29% at a fixed exchange rate in the first quarter of the 2025 fiscal year from July to September, while the market forecast is 29.7%.
Due to its close collaboration with OpenAI, Microsoft is widely regarded as a leader in making money from generating artificial intelligence. Over the past year, Microsoft has been investing heavily in artificial intelligence to expand its data center network. However, the company's core business unit Azure, which utilizes AI technology, has not grown as expected.
Due to the disappointing growth rate of Microsoft's core business, the stock prices of other large tech stocks have also been hit. Amazon's stock price fell by 3.4% after hours, and Meta platform's stock price fell by 3% at one point.
People on Wall Street don't have much patience. They see you spending billions of dollars and they want to see this kind of income increase, "said Daniel Morgan, a senior portfolio manager at Synovus Trust. The company holds shares in Microsoft.
He added, "If these companies' performance cannot exceed expectations and cannot far exceed expectations, then they will be criticized
Continue investing to meet AI needs
In fact, Microsoft's AI growth is not without highlights: Microsoft's artificial intelligence services accounted for 8 percentage points of Azure's growth in the fourth quarter, up from 7 percentage points in the previous quarter.
Microsoft has not released absolute revenue figures for Azure, which is the most suitable part of Microsoft's business to leverage artificial intelligence technology.
Iverson said, "Although we pointed out in April that there were some capacity constraints in the field of artificial intelligence, the contribution of artificial intelligence continues to grow every quarter." He added, "The interest and demand for artificial intelligence remain an important driving force for growth
However, such highlights cannot offset the impact of Microsoft's surge in spending: Microsoft's capital expenditures (including finance leases) increased by 77.6% year-on-year to $19 billion in the previous fiscal quarter, a significant increase from $14 billion in the first three months.
Microsoft's Vice President of Investor Relations, Brett Iversen, stated that the company will continue to increase its expenses to meet& quot; Strong customer demand& quot;。
Microsoft's stock price has risen by over 25% in the past 12 months. However, due to the disappointing performance of electric vehicle manufacturer Tesla, Google's parent company Alphabet is expected to increase expenses, leading to a widespread sell-off of technology stocks recently. Since reaching a historic high on July 5th, Microsoft has accumulated a 10% decline in just over three weeks.
The growth of the intelligent cloud department is slightly lower than expected
From a departmental perspective, Microsoft's Intelligent Cloud division (which belongs to the Azure cloud computing platform) saw a year-on-year revenue growth of 19% in the fourth quarter, reaching $28.5 billion, lower than the analyst expectation of $28.68 billion according to LSEG's data.
The growth rate of Microsoft's productivity business unit (including Office software, LinkedIn, and 365 Copilot) is 11%, compared to the expected 10%.
Thanks to the stable sales of personal computers, Microsoft's personal computer business (including Windows and devices such as Xbox and Surface) saw a 14% year-on-year increase in revenue to $15.9 billion. According to research firm International Data Corporation (IDC), the personal computer market grew for the second consecutive quarter from April to June this year.
Microsoft stated that it needs to continue spending to expand its global data center network and overcome capacity limitations that hinder its ability to meet artificial intelligence needs.
Microsoft has invested approximately $13 billion in OpenAI, and Microsoft's achievements in the AI field are largely driven by OpenAI's technology, such as the 365 Copilot assistant for enterprises, which costs $30 per month and has been widely used since last year.
Microsoft CEO Satya Nadella is pushing the company to fully invest in AI technology, integrating it into almost all products - from search engine Bing to office software such as Word.
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