Microsoft shares drop as cloud miss overshadows better-than-expected revenue and earnings

Microsoft shares fell 7% in extended trading on Tuesday after the software company reported disappointing cloud revenue, overshadowing stronger earnings and revenue than analysts had predicted.

Here’s how the company did, compared with the LSEG consensus:

• Earnings per share: $2.95 vs. $2.93 expected
• Revenue: $64.73 billion vs. $64.39 billion expected

Microsoft’s revenue increased 15% year over year in the fiscal fourth quarter, which ended on June 30, according to a statement. Net income, at $22.04 billion, was up from $20.08 billion, or $2.69 per share, in the year-ago quarter.

The company’s top segment, Intelligent Cloud, generated $28.52 billion in revenue. It includes the Azure public cloud, Windows Server, Nuance and GitHub. The total was up about 19% and below the $28.68 billion consensus among analysts surveyed by StreetAccount.

Revenue from Azure and other cloud services grew 29% during the quarter. Analysts polled by CNBC and StreetAccount had expected 31% growth. Microsoft doesn’t disclose revenue from the category in dollars. Last week Google parent Alphabet said revenue from its cloud business, encompassing Workspace productivity software and Google Cloud Platform infrastructure, went up by about 29%. 

The Productivity and Business Processes unit that includes Office software and LinkedIn produced $20.32 billion in revenue. That’s up 11% and more than the $20.13 billion StreetAccount consensus.

During the fiscal fourth quarter, Microsoft started selling Surface PCs with AI features that can run certain models locally without the need for an internet connection. Dell, HP and other device makers also touted their own so-called Copilot+ PCs. CEO Satya Nadella said at a press briefing in May that “we’re bringing real joy and a sense of wonder back to creation on the PC.”

Executives will discuss the results and issue guidance on a conference call with analysts starting at 5:30 p.m. ET.