Microsoft’s AI Business Growth Falls Short of Expectations

Microsoft recently released its second-quarter earnings, unveiling impressive results in its AI business. However, the figures were not quite enough to appease investors, leading to a slight dip in the company's stock value.

Slower Growth in AI and Cloud Computing Sales

The sales figures related to Azure and other cloud computing services saw a 31% growth in fiscal Q2. While this growth is commendable, it fell slightly short of the 31.8% anticipated by analysts surveyed by Bloomberg.

Satya Nadella's Optimistic Outlook

Despite the minor setback, Microsoft's CEO, Satya Nadella, remains upbeat about the company's AI prospects. Nadella proudly announced that the AI business has achieved an annual revenue run rate of $13 billion, marking a remarkable 175% increase year-over-year.

Nadella expressed his enthusiasm for the future, stating, "We are continuously innovating across our technology stack to assist customers in unlocking the full potential of AI and seizing the vast opportunities that lie ahead."

Market Response and Investor Concerns

Following the earnings report, Microsoft's stock experienced a 4% decline in after-hours trading on Wednesday. Investors and tech executives have been closely monitoring the company's AI investments, questioning the substantial capital allocated to AI development and the resulting returns.

Of particular concern was the unveiling of DeepSeek's AI model, which garnered attention for its perceived cost-efficiency compared to US counterparts. This development led to a collective decline in stock values, wiping off a total of $1 trillion from various US companies' market capitalizations.

Microsoft, known for its significant investment in OpenAI, was among the companies affected by the market reaction to DeepSeek's AI model announcement. The industry awaits further insights into Microsoft's strategy to navigate the evolving landscape of AI technology.

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By: abitter@businessinsider.com (Alex Bitter)
Title: Microsoft’s AI Business Growth Falls Short of Expectations
Sourced From: www.businessinsider.com/microsoft-ai-business-booming-not-enough-reassure-investors-q2-earnings-2025-1
Published Date: Wed, 29 Jan 2025 21:36:00 +0000