Microsoft (MSFT) reported its second quarter earnings after the bell on Wednesday, beating Wall Street estimates on the top and bottom lines, with cloud revenue topping $50 billion for the first time.<\/p>\n
But the company’s stock fell over 11% Thursday as investors worried about that cloud growth slowing \u2014 and about the company’s ballooning AI-fueled spending.<\/p>\n
\u201cWe are only at the beginning phases of AI diffusion, and already Microsoft has built an AI business that is larger than some of our biggest franchises,” CEO Satya Nadella said in a statement.<\/p>\n
Microsoft is one of the biggest beneficiaries of the AI explosion, thanks to its early investments in ChatGPT developer OpenAI, sending its market capitalization above the $4 trillion mark in July. But it’s come down from those highs as investors continue to raise concerns about the AI industry’s massive spending.<\/p>\n
In Q2, earnings per share (EPS) of $5.16 on revenue of $81.27 billion topped the $3.92 and $80.3 billion Wall Street was anticipating.<\/p>\n
Microsoft Cloud revenue came in at $51.5 billion, just ahead of an expected $51.2 billion. The company reported Cloud revenue of $40.9 billion in the same period last year.<\/p>\n
Microsoft\u2019s Productivity and Business Processes, which includes revenue from Microsoft 365 Commercial and Consumer Cloud, hit $34.1 billion. Wall Street was expecting $33.6 billion.<\/p>\n The company’s Intelligent Cloud business, which includes Azure sales, brought in $32.9 billion, beating estimates of $32.2 billion.<\/p>\n “Maybe it wasn’t high enough for people who wanted a higher number,” RBC Capital Markets managing director Rishi Jaluria told Yahoo Finance.<\/p>\n Remaining performance obligations (RPO), or the value of contracts Microsoft has with customers that haven’t been paid out yet, hit $625 billion. Some 45% of that comes from OpenAI commitments. The number has become a key metric to help Wall Street better gauge overall AI demand.<\/p>\n Microsoft continues to face AI capacity constraints, meaning customer demand for AI is outpacing Microsoft\u2019s ability to supply it, putting an artificial cap on the Windows maker\u2019s revenue.<\/p>\n That\u2019s also why the company is pouring billions more into capital expenditures, which hit $37.5 billion in the quarter, up from $22.6 billion in the second quarter of 2025.<\/p>\n The company’s More Personal Computing business, which is comprised of sales of its Surface and Xbox products, as well as Windows software, generated $14.3 billion, in line with expectations.<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>