Microsoft earnings beat expectations, cloud growth continues to slow

Microsoft (MSFT) announced second-quarter earnings after the bell on Tuesday, barely beating analysts’ revenue expectations and beating earnings per share.

Here are the key figures in the report, as compiled by Bloomberg, compared to what analysts are expecting this quarter.

  • Revenues: $52.7 billion – $52.9 billion expected

  • Adjusted EPS: $2.32 to $2.30 expected

  • Efficiency and Business processes: $17 billion to $16.8 billion expected

  • Smart Cloud: $21.5 billion – $21.4 billion expected

  • More Personal Computing: $14.2 billion – $14.7 billion expected

Microsoft’s shares rose more than 4% immediately after the news.

Despite the decline in earnings per share, Microsoft’s cloud business continued to slow down this quarter. The company reported that the Smart Cloud segment grew 18% this quarter, while Azure services grew 31%. This figure is lower than last year’s second quarter, when Intelligent Cloud and Azure grew 26% and 46% respectively.

“As Microsoft Cloud transforms the world’s most advanced AI models into a new computing platform, the next big wave of computing is emerging,” Microsoft CEO Satya Nadella said in a statement. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new age of AI.”

Microsoft’s announcement follows news that the company has made a multi-year, multi-billion-dollar investment in OpenAI to better fight its competitors, from Amazon (AMZN) to Google (GOOG, GOOGL).

The investment is expected to help Microsoft further differentiate its cloud offerings from competitors like Amazon and Google. The company is also said to be bringing the technology to its Bing search engine, a move that could threaten Google’s search dominance.

But just last week, Microsoft laid off about 10,000 workers. The move came as the company grappled with declining PC sales. Windows OEM revenue, which is Microsoft’s revenue from selling the operating system to computer manufacturers, fell 39% year-over-year.

The company is also continuing its efforts to acquire video game giant Activision Blizzard for $69 billion. So far, the Federal Trade Commission, the UK’s Competition and Markets Authority and the EU’s European Commission have either filed complaints about the deal or are working directly to break the deal.

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