Disappointing forecast overshadows positive financial results
Microsoft’s stock suffered its worst decline in two years, plummeting more than 6% on Thursday following the release of a financial forecast that fell short of analysts’ expectations. According to a report from CNBC, this downturn comes despite the tech giant exceeding revenue estimates for the quarter that ended in September.
Investors were spooked by Microsoft’s projection of $68.1 billion to $69.1 billion in revenue for the current quarter, falling short of the $69.83 billion analysts had anticipated. This cautious outlook overshadowed the company’s impressive 16% revenue growth in the previous quarter.
Microsoft’s cloud computing platform, Azure, showed robust growth with revenue up 33% in the past quarter. However, chief financial officer Amy Hood projected a slight slowdown in the next quarter, estimating growth between 31% and 32% in constant currency. This news comes on the heels of Google’s announcement of a 35% rise in its own cloud revenue, reaching $11.35 billion.
“We view Q1 results as solid across the core Azure and Office growth businesses, though tempered by a softer Q2 outlook,” analysts at BofA Global Research wrote in a report on Thursday.
Microsoft attributed the lower forecast partly to delays in data center infrastructure deliveries, hindering its ability to meet demand in the coming quarter. CEO Satya Nadella expressed confidence that this supply-demand imbalance would be resolved in the latter half of the fiscal year.
“I feel pretty good that going into the second half of even this fiscal year, that some of that supply-demand will match up,” CEO Satya Nadella said on the earnings call.
Despite the stock’s tumble, Microsoft’s ongoing investments in artificial intelligence (AI) remain a key focus for investors. The company continues to expand its AI infrastructure and increase chip spending to manage the growing computational demands of AI workloads. Notably, Microsoft has invested close to $14 billion in OpenAI, the developer of ChatGPT, which recently achieved a valuation of $157 billion.
Hood noted that Microsoft expects a $1.5 billion impact on income this quarter, primarily due to an anticipated loss from its investment in OpenAI.
As of Thursday’s close, Microsoft’s stock has risen by a modest 8% for the year, underperforming the Nasdaq’s 21% gain.
