Microsoft Stock Falls as Intelligent Cloud Revenue Misses Expectations

Microsoft Stock Falls as Intelligent Cloud Revenue Misses Expectations

Microsoft (MSFT) shares dropped over 5% in after-hours trading on Wednesday after the company reported fiscal second-quarter results, with its Intelligent Cloud revenue falling short of analyst expectations.

Strong Overall Performance but Cloud Revenue Misses
Microsoft's total revenue increased 12% year-over-year to $69.63 billion, surpassing analyst projections from Visible Alpha. Earnings rose to $24.11 billion, or $3.23 per share, up from $21.87 billion, or $2.93 per share, in the same period last year. Both figures beat expectations for the quarter ending December 31.

However, the Intelligent Cloud segment, which includes the Azure cloud computing platform, delivered $25.54 billion in revenue—up 19% year-over-year but slightly below projections. Azure's total revenue for the quarter approached $41 billion, Microsoft reported.

Stock Performance and Forward Outlook
Microsoft's stock, which also declined during the regular trading session, had gained around 5% in 2025 through Wednesday's close before the extended-hours dip. Looking ahead, CFO Amy Hood projected Intelligent Cloud revenue for the third quarter to range between $25.9 billion and $26.2 billion, exceeding the pre-earnings consensus of $25.76 billion.

AI and Competitiveness in Focus
CEO Satya Nadella highlighted the company's growing AI revenue, which reached a run rate of $13 billion. Additionally, daily usage of Microsoft's Copilot AI assistant doubled quarter-over-quarter.

The results come amid heightened competition in AI technology. Microsoft-backed OpenAI faced scrutiny this week after the launch of DeepSeek's app, powered by an AI model claiming to rival U.S. competitors at significantly lower costs. Analysts from Raymond James and Bank of America suggested that such advancements could drive U.S. tech giants, including Microsoft, Alphabet (GOOGL), and Amazon (AMZN), to accelerate their AI initiatives.

Microsoft announced that DeepSeek’s R1 model is now available on its Azure AI Foundry platform, and customers will soon have the option to run it locally on Copilot+ PCs.

Despite solid overall earnings, the slight miss in cloud revenue and competitive pressures weighed on Microsoft’s stock.