Microsoft’s profits exceeded expectations, cloud growth continues to slow

Microsoft (MSFT) announced its second-quarter results after the bell on Tuesday, narrowly ahead of analysts’ expectations for revenue and beating earnings per share.

Here are the key figures from the report compared to what analysts expected from the quarter, compiled by Bloomberg.

  • Income: USD 52.7 billion compared to the expected USD 52.9 billion

  • Adjusted EPS: $2.32 versus expected $2.30

  • Productivity and business processes: $17 billion versus the expected $16.8 billion

  • Smart Cloud: USD 21.5 billion compared to the expected USD 21.4 billion

  • More personal computers: USD 14.2 billion compared to the expected USD 14.7 billion

Microsoft shares jumped more than 4% immediately after the news was released.

Despite breaking earnings per share, Microsoft’s cloud business continued to slow this quarter. The company said its Intelligent Cloud segment grew 18% this quarter, while its Azure services grew 31%. This is less than last year’s second quarter, where Intelligent Cloud and Azure saw growth of 26% and 46%, respectively.

“The next big wave of computing is coming as Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” Microsoft CEO Satya Nadella said in a statement. “We are committed to helping our clients use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

Microsoft’s announcement follows news that the company is committing to a multi-year, multi-billion dollar investment in OpenAI as it tries to outperform competitors, including from Amazon (AMZN) to Google (GOOG, GOOGL).

The investment is expected to help Microsoft further differentiate its cloud offerings from competitors such as Amazon and Google. The company is also said to be bringing the technology to its Bing search engine, which could threaten Google’s search engine dominance.

However, just last week, Microsoft laid off about 10,000 employees. The move comes as the company is dealing with faltering PC sales. Windows OEM revenue, the amount Microsoft earns from selling its operating system to PC manufacturers, fell 39% year-on-year.

The company is also continuing its bid to buy video game giant Activision Blizzard for $69 billion. So far, the Federal Trade Commission, the UK Competition and Markets Authority and the EU’s European Commission have either lodged complaints about the agreement or are even working to annul it.

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