Microsoft shares fall more than 6% after results fall short in latest AI disappointment

Microsoft (MSFT) announced its fiscal fourth-quarter earnings after the bell Tuesday, beating results but missing cloud revenue expectations, sending the software giant’s shares tumbling following the report.

For the quarter, Microsoft reported earnings per share (EPS) of $2.95 on revenue of $64.7 billion. Wall Street was forecasting earnings per share of $2.94 and revenue of $64.5 billion, according to data compiled by Bloomberg. Microsoft reported earnings per share of $2.69 on revenue of $56.2 billion during the same period last year.

Microsoft’s overall cloud revenue was $36.8 billion, in line with expectations of $36.8 billion, but the company’s intelligent cloud revenue, which includes its Azure services, fell short, coming in at $36.8 billion. $28.5 billion versus expectations of $28.7 billion.

Microsoft shares fell more than 7% in after-market trading.

Microsoft’s AI error caused shares of other AI-heavy companies like Meta to fall in after-hours trading. The social media giant lost more than 3% on the news.

The report follows Google rival and parent Alphabet’s (GOOG, GOOGL) earnings announcement last week, during which the company said it is seeing an increase in cloud revenue, partially due to interest in AI products.

Still, Google hasn’t offered specific numbers on AI’s impact on its cloud business, leaving some analysts like UBS Global Research’s Stephen Ju to predict that the revenue benefits of the company’s AI spending may not occur until the end of the year. first half of 2025 at the earliest. .

According to Karl Keirstead, an analyst at UBS Global Research, Microsoft has also been gaining more market share from Google and Amazon.

“In terms of share changes between AWS, Microsoft Azure and Google Cloud, the most consistent theme in this round of checks was the number of customers and partners citing Microsoft share gains resulting from its early leadership on the AI ​​front,” Keirstead wrote in a recent note about the three main cloud players.

“This has been a recurring theme in scans over the last 6 to 12 months and comments about Azure’s relative strength seemed consistent with previous scans,” he added.

During Alphabet’s earnings call, CFO Ruth Porat said the company spent $13 billion on capital expenditures, up from $12 billion in the previous quarter, adding that the vast majority of that spending goes to AI.

Amazon (AMZN) is expected to report earnings on August 1.

Google shares are up 22% year to date, while Amazon shares are up 23%.

Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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