Microsoft Corp. shares fell as much as 6% in extended trading despite its quarterly results coming in ahead of what analysts had anticipated.

Revenue for the quarter stood at $69.63 billion, while analysts were working with a $68.78 billion figure. Earnings Per Share (EPS) also stood at $3.23, well above the consensus expectation of $3.11.

However, revenue growth of 12.3% year-on-year was the slowest in nearly two years, something that analysts were fearing not just for Satya Nadella-led enterprise, but for the entire “magnificent seven” group of shares.”

Microsoft’s intelligent cloud segment, which also houses Azure, grew by 19% from last year, but the $25.54 billion figure turned out to be lower than the $25.83 billion consensus estimate. Revenue from Azure and other cloud services also grew 31%, slower than the 33% in the previous quarter. Nadella did mention though, that the Artificial Intelligence business has now reached $13 billion in annualised revenue run-rate.
The Redmond, Washington-based software maker is considered a leader in commercializing artificial intelligence products, thanks to its close partnership with ChatGPT maker OpenAI. In the last year, Microsoft has unleashed a blizzard of Copilot-branded AI assistants, but efforts to monetize those products is taking longer than some investors would prefer.

Azure AI services grew 157%. But overall sales in the key cloud unit are being hurt by the fact that the company still doesn’t have enough data center capacity to meet customer needs, Chief Financial Officer Amy Hood said in an interview.

Microsoft expects to spend $80 billion this fiscal year on AI data centers. Wall Street has begun to question the massive outlays, especially after the Chinese upstart DeepSeek released a new open-source AI model that it claims rivals the abilities of US technology at a fraction of the cost.

Higher-than-expected capex also resulted in lower margins for the cloud business.

Microsoft shares are trading 4.4% lower as of 7 PM New York time at $423.2. The stock fell 1% in regular trade and was up 4% in the last one month.

(With Inputs From Agencies.)