How did Microsoft's Intelligent Cloud revenue perform in Q2 2025?

Microsoft's Intelligent Cloud revenue showed a rise of 12% year-over-year, reaching $69.63 billion in Q2 2025, which surpassed the analyst consensus from Visible Alpha. However, this growth was slightly below market expectations. The revenue from Microsoft’s Intelligent Cloud segment, which includes its Azure cloud computing platform, experienced a more robust increase of 19% to $25.54 billion, but still fell slightly short of projections. Here’s a detailed analysis:

1. **Overall Growth**: Microsoft's Intelligent Cloud revenue grew by 12% year-over-year, reaching $69.63 billion, which is a positive indicator of the company's continued growth in the cloud computing sector. This growth is a result of increased demand for cloud services and Microsoft's successful innovation in the space.
2. **Segmental Performance**: The Azure cloud computing platform, which is a key component of the Intelligent Cloud segment, saw revenue rise by 19% to $25.54 billion. This growth is significant, but it was slightly below the market's expectations, which had forecasted revenue of $25.8 billion. This slight miss in projections could be due to various factors such as market dynamics, competitive landscape, or timing of customer deployments.
3. **AI Services Contribution**: Microsoft reported a 13-percentage point growth in Azure from AI services, indicating a strong demand for its AI offerings. The company's AI business has surpassed an annual revenue run rate of $13 billion, marking a 175% year-over-year increase. This demonstrates the significant impact of AI on the company's revenue growth.
4. **Market Reaction**: Despite the growth in revenue, Microsoft's stock fell after the earnings report was released. This could be due to the market's reaction to the slight miss in revenue from the Intelligent Cloud segment. The stock fell more than 5% in extended trading, reflecting investor concerns about the sustainability of the growth.
5. **Future Outlook**: Microsoft expects Intelligent Cloud fiscal second-quarter revenue to be between $25.9 billion and $26.2 billion, which is higher than the analyst consensus. This indicates the company's confidence in continued growth in the cloud segment. However, the impact of competitive pressures, particularly from Chinese startups like DeepSeek, remains a concern for investors.

In conclusion, while Microsoft's Intelligent Cloud revenue showed strong growth in Q2 2025, missing market expectations slightly and leading to a decline in stock price, the company's overall performance and future outlook remain positive, supported by the growth in AI services and the company's strategic investments in the sector.