Microsoft Stock Dips as Azure Growth Misses Expectations Despite Strong AI Revenue

Microsoft (NASDAQ: MSFT) shares dropped over 2% in after-hours trading Wednesday, despite the company surpassing Wall Street estimates for its fiscal second-quarter earnings.

For the quarter ending Dec. 31, Microsoft reported earnings of $3.23 per share on revenue of $69.63 billion, a 12% increase. Analysts had forecasted $3.13 per share and $68.92 billion in revenue, according to Investing.com.

The key concern was Azure and cloud services, which grew 31% year-over-year, slightly below analysts’ 31.9% expectation and down from 33% in Q1. AI contributed about 13% to the cloud growth. Meanwhile, Microsoft's AI-driven revenue reached an annual run rate of $13 billion, surging 175% year-over-year. The company reiterated its commitment to balancing investment in AI and cloud infrastructure with operational efficiency.

Despite Azure’s slight miss, analysts remain bullish on Microsoft’s long-term prospects. Truist Securities analyst Joel Fishbein emphasized Microsoft’s dominance in enterprise software, strong AI positioning, and potential for further revenue acceleration as AI adoption scales through cloud and Copilot services.

Investors remain cautious, but Microsoft’s AI momentum and cloud expansion continue to fuel optimism for future growth.