Microsoft Shares Fall on Slower Cloud Revenue Growth Despite Q4 Earnings Beat

Microsoft Corporation (NASDAQ:MSFT) shares dipped 1% on Wednesday following the release of its fourth-quarter earnings report, which revealed cloud revenue growth falling short of Wall Street's expectations despite increased investment spending aimed at boosting growth.

Microsoft reported earnings per share of $2.95 on revenue of $64.7 billion, compared to the analyst consensus of $2.94 and $64.38 billion, respectively.

Azure, Microsoft's cloud division, posted a 29% growth rate, falling short of the anticipated 30.2% and marking a deceleration from the 31% growth reported in the third quarter. Azure's performance is closely watched as an indicator of AI demand, with AI-driven growth contributing 8% to Azure's overall growth, up from 7% in the previous quarter.

Despite the slower cloud growth, Microsoft increased its capital expenditures to $19 billion in Q4, up from $14 billion in Q3 and nearly double the $10.7 billion spent in Q4 of the previous year.

On a positive note, Microsoft's commercial bookings surged 17% year-over-year, significantly exceeding expectations. However, the overall sentiment was dampened by concerns over the slowdown in cloud revenue growth.