Microsoft Slowdown In Cloud Growth Worries Wall Street

Microsoft has posted a strong set of financial results for the fourth quarter and year end 2024, but investors made their displeasure known after the software giant didn’t quite meet their lofty expectations.

The posted results revealed double digit in growth in both profits and revenues at Microsoft during the last quarter and past 12 months. However Azure’s growth slowed slightly during the three months to 30 June to 29 percent year-on-year, down from 31 percent in the previous quarter.

Microsoft reportedly said this was due in part to demand for AI outstripping its capacity, but Wall Street is a fickle mistress, and Microsoft’s share price consequently fell 4 percent on Tuesday closing, and 1.3 percent to $417.69 on Wednesday afternoon.

Q4, FY2024 results

This share price decline seems even more puzzling when the actual financial performance of the software giant is examined.

For the fourth quarter ending 30 June, Microsoft posted a 10 percent rise in net profit to $22 billion, from $20 billion in the same year-ago quarter.

This beat analysts forecasts of $21.8bn in Q4 profits.

Revenue in the fourth quarter meanwhile rose 15 percent to $64.7 billion, from $56.2 billion a year previously.

The Q4 revenue of $64.7 billion beat analyst expectations of $64.4bn.

Then for the full year ending 30 June, Microsoft posted a net profit up 22 percent to $88.1 billion, from $72.4bn in FY23.

FY24 revenue meanwhile rose 16 percent to $245.1 billion, from $211.9 billion in FY23.

“Our strong performance this fiscal year speaks both to our innovation and to the trust customers continue to place in Microsoft,” said CEO and chairman Satya Nadella. “As a platform company, we are focused on meeting the mission-critical needs of our customers across our at-scale platforms today, while also ensuring we lead the AI era.”

Divisional breakdown

There was equally good fiscal performances when examining the individual business lines.

Revenue in Productivity and Business Processes rose 11 percent to $20.3 billion, thanks to 12 percent revenue increase in Office Commercial products and cloud services; a 3 percent rise in Office Consumer products and cloud services revenue; a 10 percent rise in LinkedIn revenue’ and 19 percent revenue growth for Dynamics products and cloud services.

Revenue in Intelligent Cloud was $28.5 billion and increased 19 percent, as Server products and cloud services revenue increased 21 percent.

Revenue in More Personal Computing was $15.9 billion and increased 14 percent, thanks to a 7 percent rise in Windows revenue; a 11 percent decrease in Devices revenue; a 61 percent rise in Xbox content and services revenue (helped by the Activision acquisition); and a 19 percent increase in Search and news advertising revenue.

Microsoft also returned $8.4 billion to shareholders.