Microsoft’s outage that the world witnessed on July 19 was linked to a major cyber security firm CrowdStrike. Now, Microsoft 365 services were seen experiencing performance issues, with many users reporting degraded service. Microsoft’s 365 Status on X tweeted – “We’re currently investigating access issues and degraded performance with multiple Microsoft 365 services and features. More information can be found under MO842351 in the admin center.” Later, the X handle communicated the resolution too – “We’ve confirmed after extended monitoring that the issue is now resolved. Please see MO842351 in the admin center for more details.”

The 3-trillion dollar market cap company, Microsoft shares are quoting around $420, almost 5% lower than the previous day’s close, in the opening minutes of the session on Wednesday, July 31.

That aside, Microsoft Corp. has announced the financial results for the quarter ended June 30, 2024, as compared to the corresponding period of last fiscal year. The Revenue was $64.7 billion and increased 15% (up 16% in constant currency) while the Operating income was $27.9 billion and increased 15% (up 16% in constant currency). The Net income for Microsoft was $22.0 billion and increased 10% (up 11% in constant currency) while the Diluted earnings per share was $2.95 and increased 10% (up 11% in constant currency).

“We closed out our fiscal year with a solid quarter, highlighted by record bookings and Microsoft Cloud quarterly revenue of $36.8 billion, up 21% (up 22% in constant currency) year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Fiscal Year 2024 Results

Microsoft Corp. also announced the results for the fiscal year ended June 30, 2024, as compared to the corresponding period of last fiscal year. The Revenue was $245.1 billion and increased 16% (up 15% in constant currency) while the Operating income was $109.4 billion and increased 24%, and increased 22% non-GAAP (up 21% in constant currency). The Net income was $88.1 billion and increased 22%, and increased 20% non-GAAP while the Diluted earnings per share was $11.80 and increased 22%, and increased 20% non-GAAP.

Antonio Ernesto Di Giacomo – Market Analyst Latam at xs.com shares his view on the results of Microsoft:

Despite Microsoft’s solid overall performance, the intelligent cloud sector, one of the company’s primary sources of revenue, did not meet expectations. Intelligent cloud revenues were $28.52 billion, slightly less than the expected $28.72 billion.

Azure’s growth, Microsoft’s cloud services platform, was 29%, below the expected 31%. Although this growth is significant, it did not meet analysts’ expectations, raising doubts about Microsoft’s ability to maintain its momentum in the competitive cloud market.

Azure remains an essential pillar for Microsoft, and any slowdown in its growth could negatively affect investors ‘ perceptions of the company’s future. However, Microsoft continues to lead in various technological areas, and Azure’s performance still surpasses that of many competitors in the market.

In addition to the cloud, Microsoft has shown solid growth in other sectors. Commercial Office sales increased by 12%, and direct-to-consumer sales grew by 3%, demonstrating ongoing solid demand for its productivity products. However, the company faces challenges in its hardware business, with an 11% decrease in marketing.

At the same time, traffic acquisition costs for Bing increased by 19%, reflecting the ongoing challenge of competing with giants like Google in the search engine space. In the gaming sector, the Xbox division reported a 61% increase in revenue, primarily driven by the acquisition of Activision, although Xbox’s Xbox’s organic growth was only 3%.

An area of growing focus for Microsoft has been artificial intelligence, leading to a significant increase in its capital expenditures. The company invested $13.87 billion this quarter, exceeding market expectations. This investment reflects Microsoft’s commitment to innovation and its desire to lead the development of artificial intelligence technology.

However, this trend of increasing AI spending is raising concerns in the market about the sustainability of these investments in the long term. Balancing innovation and profitability will be crucial for Microsoft’s future and its competitive position in the tech industry.

In conclusion, while Microsoft has shown impressive performance in terms of overall revenue, concerns about its intelligent cloud business and increased capital expenditures pose challenges for the company. The drop in stock prices following the earnings announcement underscores the market’s sensitivity to any sign of a slowdown in its key Azure business. Nonetheless, with its continued investment in artificial intelligence and its acquisition strategy, Microsoft remains a strong leader in the tech sector, seeking to balance growth with prudent financial management.