Mad 7: Microsoft Tanks, Down $250 Billion After Cloud Miss

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In our preview of today’s main event, we said that the mood for the Mag7 would be defined by Microsoft’s fiscal Q4 earnings, and for those long the AI sector we have some bad news: Microsoft, true to its name, just shat the bed, because despite beating on revenue and EPS, the company missed on cloud and its shares are tumbling.Here is what Microsoft () just reported for Q4:

EPS $2.95, up 11% YoY, and beating the estimate of $2.93

Revenue $64.73 billion, up1% YoY. and beating estimate $64.52 billion

Intelligent Cloud revenue $28.52 billion, missing estimate $28.72 billion
- Azure and other cloud services revenue Ex-FX +30%, in line with estimates of +30.3%
Productivity and Business Processes revenue $20.32 billion, beating estimate $20.21 billion
More Personal Computing revenue $15.90 billion, beating estimate $15.54 billion

Revenue at constant currency +16%, beating estimate +14.7%

Operating income $27.93 billion, beating estimate $27.63 billion

Capital expenditure $13.87 billion, beating estimate $13.27 billion, which normally would have been sufficient to send the stock higher but not this time.

Here is the big picture breakdown:(Click on image to enlarge)
And the segment detail:(Click on image to enlarge)
While the results were generally strong, investor focused on the AI-heavy cloud segment: here, Azure posted a 29% revenue gain in the quarter, decelerating from the 31% growth in the previous period, with revenues just missing estimates.Commenting on the quarter, CEO Satya Nadella said that “our strong performance this fiscal year speaks both to our innovation and to the trust customers continue to place in Microsoft. As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era.”Nadella has been infusing Microsoft’s product line with AI technology from partner OpenAI, including digital assistants called Copilots that can summarize documents and generate computer code, emails and other content. The company also is selling Azure cloud subscriptions featuring OpenAI products. However, judging by the disappointing cloud numbers, chatbots, pardon AI is rapidly emerging as the next “3D TV” megadud.The market did not take it quite that way and the stock is plunging 8% – or roughly $250 billion in market cap – in after hours trading on the small miss in cloud revenue…(Click on image to enlarge)
… with both S&P and Nasdaq futures getting hammered after hours as the world’s biggest company craters.(Click on image to enlarge)More By This Author: