The slowdown and lower than expected growth rate of cloud business has triggered a decline in Microsoft's stock price. On July 31st, Microsoft released its financial report for the fourth quarter of fiscal year 2024 (ending on June 30th, 2024). According to the financial report, Microsoft's fourth quarter revenue was $64.7 billion, a year-on-year increase of 15%. The net profit was 22 billion US dollars, a year-on-year increase of 10%. Due to the underperformance of its cloud business, Microsoft's stock price fell as much as 7% in after hours trading. However, Microsoft also stated that Azure growth will accelerate in the second half of the 2025 fiscal year, and Microsoft's stock price will subsequently reduce its decline by nearly 3%.
Specifically, the revenue of Microsoft's Intelligent Cloud division was $28.5 billion, a year-on-year increase of 19%, lower than analysts' expectations of $28.68 billion. Among them, Azure and other cloud service revenue increased by 29%, lower than the expected 30.6%, including 8 percentage points from AI services.
Regarding the performance of the cloud business, during the earnings conference call, Amy Hood, Microsoft's Executive Vice President and Chief Financial Officer, stated that "we saw slightly lower than expected growth in some European regions in June." In addition, revenue from enterprise and partner services decreased by 7% compared to the same period last year.
Meanwhile, Microsoft will continue to invest in AI infrastructure. In the fourth quarter, Microsoft's capital expenditures, including financing leases, were $19 billion, a significant increase from the $14 billion in the third quarter. Amy Hood stated that this data is in line with expectations, with cloud and AI related expenditures accounting for almost half of total capital expenditures. Half of the cloud and AI related expenditures will be used for infrastructure needs, while the other half will be used for servers. Microsoft will continue to build and lease data centers.
Azure's business growth is lower than expected, and related capital expenditures are increasing, which means that the return on investment in artificial intelligence may take longer than previously imagined. Microsoft expects Azure's revenue growth in the first quarter of fiscal year 2025 to be approximately 28% to 29%, driven by its consumer business (including artificial intelligence), which is growing faster than Azure. Meanwhile, it is expected that Azure's growth will accelerate in the second half of the 2025 fiscal quarter, as the company's capital investment will increase available artificial intelligence capacity to meet the growing demand.
Microsoft Chairman and CEO Satya Nadella stated in a conference call that the number of Azure AI customers using Microsoft's data and analytics tools has increased by nearly 50% year-on-year.
In May of this year, some Microsoft employees in China received company emails asking if they were willing to migrate to other regions for work, including the United States, Australia, Ireland, and other countries. The employees involved included the Azure ML team of the AI platform. Microsoft responded that this internal transfer will not affect the company's operations in China.
More personal computing business revenue was $15.9 billion, a year-on-year increase of 14%. Windows revenue increased by 7%, while device revenue decreased by 11%. Thanks to the acquisition of Activision Blizzard, Xbox content and services revenue increased by 61%.
Amy Hood said, "Device revenue decreased by 11%, roughly in line with expectations, as we are still focused on higher margin high-end products. Although we are still in the early stages, we are excited about the recently launched Copilot+computer
In July this year, Microsoft said that it had decided to integrate channels in the Chinese Mainland market, and customers could still access Microsoft's comprehensive consumer products and services through retail partners and Microsoft.com.
From the disclosed financial data, it can be seen that in recent years, Microsoft has placed more emphasis on AI, while the revenue from hardware products has continued to decline. Before the 2023 fiscal year, Microsoft will separately disclose the revenue of its Surface products. In the 2023 fiscal year, Microsoft will include Surface data disclosure in device revenue. Entering the 2023 fiscal year, equipment revenue continues to decline. The financial report shows a decline of 39%, 30%, 20%, 9%, 22%, and 17% in the second quarter of fiscal year 2023 to the third quarter of fiscal year 2024, respectively.
However, with the landing of AI technology, Microsoft's hardware devices may usher in a turning point. Research firm Canalys predicts that the shipment of personal computers with AI capabilities will grow rapidly, reaching 19% by 2024 and soaring to 60% by 2027.
Microsoft's productivity and business processes department is the most stable department, with revenue of $20.3 billion in the new fiscal quarter, a year-on-year increase of 11%, and an expected 10%. The revenue from Office commercial products and cloud services increased by 12%, attributed to a 13% growth in Office 365 commercial revenue. During the quarter, LinkedIn revenue increased by 10%, Office consumer products and cloud services revenue increased by 3%, and Microsoft 365 consumer users increased to 82.5 million.
From the trend of product launch, Microsoft will fully invest in artificial intelligence technology from 2023 and integrate it into almost all products of productivity software such as search engines. A large part of these products are driven by OpenAI's technology, and Microsoft has invested approximately $13 billion in this field.
Regarding safety issues, Satya Nadella said in a conference call, "We continue to prioritize safety. We are doubling down on our plans for a secure future, while implementing principles of safe design and safe operation
In July of this year, Windows users in multiple regions around the world experienced blue screens on their computers. As a result, the operations of multiple airlines, banks, and media institutions worldwide have been affected. CrowdStrike, a cybersecurity company, stated that it is related to "content deployment".