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Microsoft (MSFT-5.86%) shares fell by around 5% during after-hours trading on Wednesday after it reported Azure cloud computing growth toward the bottom range of expectations.
The tech giant surpassed Wall Street’s expectations with its fiscal second-quarter earnings driven by its artificial intelligence business.
The company reported revenues of $69.6 billion for the second quarter of fiscal year 2025 — a 12% increase year over year. Microsoft reported earnings per share of $3.23 and net income of $24.1 billion.
Microsoft was expected to report revenues of $68.9 billion for the quarter ended in December, according to analysts’ estimates compiled by FactSet. Net income was estimated to be $23.3 billion, while earnings per share was expected at $3.11.
Fiscal third-quarter revenue guidance is set between $67.7 billion and $68.7 billion, Microsoft chief financial officer Amy Hood said on the company’s earnings call. Analysts expected $69.8 billion, according to FactSet.
The company’s shares closed down by about 1%. Microsoft’s stock is up by almost 5% so far this year.
“We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead,” Microsoft chief executive Satya Nadella said in a statement. “Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year.”
Last week, Microsoft joined a slew of tech companies — including its longstanding partner, OpenAI — on a $500 billion artificial intelligence infrastructure project called Stargate. Microsoft is one of the project’s “key technology partners,” OpenAI said.
The project builds upon Microsoft and OpenAI’s relationship, the startup said, adding that it plans to continue increasing its use of Microsoft’s Azure cloud computing service alongside “additional compute” from Stargate. However, a new agreement with OpenAI “includes changes to the exclusivity on new capacity,” Microsoft said and will follow a model where the tech giant has the right of first refusal.
“To further support OpenAI, Microsoft has approved OpenAI’s ability to build additional capacity, primarily for research and training of models,” the company said.
Meanwhile, Microsoft and OpenAI are looking into whether a group associated with the Chinese AI startup DeepSeek obtained data output from OpenAI’s AI models in violation of the startup’s terms of service, Bloomberg reported, citing unnamed people familiar with the matter. Microsoft’s security team reportedly noticed unusual activity of individuals accessing large amounts of data through OpenAI’s application programming interface, or API, last fall.
Earlier this week, Nasdaq, Dow Jones Industrial Average, and S&P 500 futures fell after the release of DeepSeek-R1 on Jan. 20. Investors were spooked by the launch of DeepSeek’s reasoning AI models, which followed the December release of DeepSeek-V3, a model DeepSeek said cost just $5.6 million to develop and train on Nvidia’s (NVDA-0.95%) reduced-capability H800 chips.