Microsoft continues to show solid growth in nearly all areas of its business. According to CEO Satya Nadella, the AI sector is progressing well. He predicts a 175% growth in AI-related business for the entire year. The cloud business is also expanding, but the outlook for the next quarter is more cautious than market observers expected. This might be why Microsoft shares have slightly decreased.
In the second quarter of the fiscal year 2025, ending in December 2024, Microsoft reported a revenue of $69.6 billion. This is a 12.3% increase compared to the same period last year, when Microsoft was able to boost earnings thanks to cloud growth and AI. Industry experts had expected slightly less revenue at $68.8 billion.
Microsoft’s operating profit has increased by 17.1% year-on-year to $31.7 billion. However, net profit grew less significantly, rising by 10.2% to $24.1 billion. The diluted earnings per share were reported at $3.23, which is also a 10% increase from the previous year.
The cloud business remains the main revenue driver for Microsoft. “This quarter, Microsoft Cloud revenue was $40.9 billion, a 21% increase from last year,” said Microsoft CFO Amy Hood. The cloud business accounts for nearly 59% of the company’s total revenue. Revenue from the “Intelligent Cloud” grew by 19% to $25.5 billion.
Growth rates in other business areas are less pronounced. In the productivity and business segment, revenue from commercial Office products and related cloud services increased by 14% year-on-year to $29.4 billion. Office products and their cloud offerings for consumers grew by only 8%. LinkedIn’s revenue increased by 9%, while revenue from Dynamics products and their cloud services grew by 15%.
The PC sector contributed $14.7 billion to the company’s total revenue, which is similar to the previous year’s level, although it was $16.9 billion back then. Nevertheless, Microsoft was able to sell 4% more Windows licenses and products to manufacturers. This includes hardware revenue, which the company no longer reports separately. Revenue from Xbox content and services increased by only 2%, while revenue from search and news advertising grew by 21%.
For the current quarter, the third quarter of the fiscal year 2025, Microsoft expects revenue between $67.7 billion and $68.7 billion. Analysts had predicted a higher forecast of around $69.8 billion. Investors are apparently disappointed, causing Microsoft’s stock price to drop by nearly 5% in after-hours trading. This is despite the stock having already gained 5% in value this month.