Cloud Slowdown Cannot Tame Microsoft (MSFT) Stock Bulls

Microsoft (MSFT) shares moved lower in late-Wednesday trading as the tech giant reported fiscal second-quarter Intelligent Cloud revenue that missed analysts’ expectations. The company saw revenue rise 12% year-over-year to $69.63 billion, surpassing the analyst consensus from Visible Alpha. Earnings came in at $24.11 billion, or $3.23 per share, compared to $21.87 billion, or $2.93 per share, a year earlier. That was also above expectations for the quarter ended Dec. 31.

However, revenue from Microsoft’s Intelligent Cloud segment, which includes its Azure cloud computing platform, slightly missed projections while rising 19% to $25.54 billion. Total Azure revenue for the quarter approached $41 billion, the company said.

Shares of Microsoft fell more than 5% in extended trading. The stock, which also fell during the regular session, had gained about 5% so far in 2025 through Wednesday's close.

Microsoft expects Intelligent Cloud fiscal second-quarter revenue of $25.9 billion to $26.2 billion, CFO Amy Hood said on the company’s earnings call. That would be higher than the analyst consensus of $25.76 billion from before the results were announced.

CEO Satya Nadella said in a statement that Microsoft's AI revenue run rate rose to $13 billion. Nadella added on the company's earnings call the number of daily users of Microsoft's Copilot AI assistant doubled quarter-over-quarter.

The results come with Microsoft-backed OpenAI in focus this week after the surging popularity of an app from Chinese startup DeepSeek, which runs on an AI model it claimed can perform on par with American rivals at a fraction of the cost, raised concerns about the competitiveness of U.S. firms and their spending.

Raymond James and Bank of America analysts said that DeepSeek’s advances could push Microsoft, along with Alphabet’s (GOOGL) Google and Amazon (AMZN), to act with greater urgency. DeepSeek’s R1 model is now available on the Azure AI Foundry platform, Microsoft announced today, and customers will soon be able to run it locally on Copilot+ PCs.



Despite the slight miss in Azure revenue, Microsoft's stock bulls remain undeterred. The company's strong financial performance, driven by its cloud and AI businesses, continues to attract investors. Microsoft's gross margins reached 69% in the latest quarter, while its operating profit margin jumped to 45%, indicating a robust financial performance.

Moreover, Microsoft's strategic partnership with OpenAI has given it a competitive edge in the AI space. The company's AI revenue run rate has risen to $13 billion, up 175% year-over-year, driven by the integration of OpenAI's technologies into Microsoft's products and services.

Microsoft's cloud business, particularly Azure, has been a key driver of growth. In the second quarter, Azure revenue grew by 31%, contributing to the overall 19% growth in the Intelligent Cloud segment. This growth is likely driven by increased adoption of cloud services by businesses, as well as Microsoft's continued investment in cloud infrastructure and services.

In conclusion, while Microsoft's Azure cloud revenue slightly missed projections, the company's stock bulls remain undeterred. Microsoft's strong financial performance, driven by its cloud and AI businesses, continues to attract investors. The company's strategic partnership with OpenAI and its continued investment in cloud infrastructure and services position it well for future growth.