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Microsoft (MSFT 0.03%) shares fell after revenue from its Azure cloud computing platform came in at the low end of its prior guidance, although the unit continues to be company’s biggest growth driver. The decline sent the stock into slightly negative territory for the year, as of this writing.
Let’s do the company’s effects to see if it’s an opportunity to buy the decline.
Azure was once again the primary focus when Microsoft reported its earnings results. The unit grew its revenue by 31% in the fiscal second quarter, which was a deceleration from Q1 when Azure revenue rose 33%. It was also at the low end of its prior guidance for Azure fiscal Q2 revenue growth of between 31% and 32%.
The corporate said that its AI business exceeded an annual profit execution rate of $ 13 billion, since its Azure’s gain increased 157% year after year. He added that Azure Openai programs have doubled year after year, which has contributed to a significant adoption for their SQL solutions in Hipperscala and DB cosmos. Openai, on the other hand, has to make new Azure commitments.
Overall “intelligent cloud” revenue, where Azure sits, jumped 19% year over year to $25.5 billion.
Looking ahead, the company forecast Azure revenue to once again grow by 31% to 32% in fiscal Q3. However, it had previously talked about Azure growth accelerating in its fiscal second half as more capacity came on from prior capital expenditures (capex) spending. The company blamed challenges in its non-AI Azure business, while noting that it continues to be in a pretty capacity-constrained environment.
With respect to other segments, productivity and processes of the Microsoft industry, which Microsoft 365 and LinkedIn house, saw the source of income from 14% of one year to the next 29. 4 billion dollars. Dynamics Products and Cloud Services returned, as well as Office 365 Commercial raided the way, either expanding up to 15%. LinkedIn’s income exceeding 9% and Office 365 client income exceeding 8%.
Microsoft said that he saw the accelerated adoption of his CO -Piletes CO -Cosoft 365 customers through the agreement. He added that consumers who bought Copilot their first quarter of availability prolonged their seats more than 10 times in the last 18 months of total.
The income in their “more non -public” segment, where Windows and Xbox reside, were deleted from one year to $ 14. 7 billion. Its study and advertising company, which is also a component of the segment, is solid with the revenue expansion source of 21%.
Microsoft’s general billing is exceeding 12% of one year to the next to succeed at $ 69. 6 billion, benefit according to Centerage (BPA) expanding $ 10%. The effects gently exceeded the consensus estimates of the analysts that offer $ 68. 8 billion in cash and $ 3. 11 in BPA, as compiled through LSEG.
For its fiscal Q3, the company expects its intelligent cloud segment to grow between 19% and 20% in constant currency to $25.9 billion-$26.2 billion, while its productivity and business processes segment revenue is projected to rise by between 11% and 12% in constant currency to $29.4 billion-$29.7 billion. More personal computing segment revenue is forecast to be between $12.4 billion and $12.8 billion, which would be down from $15.6 billion a year ago.
Although Azure’s revenue source and recommendation may have disappointed investors, it is the most powerful component of Microsoft’s activities. The AI component of the Corporation is still very robust, but still limited. Meanwhile, the company is positive that as prices fall, this will result in higher consumption. He noted that each cycle saw a 10-fold improvement due to software optimizations in inference.
Meanwhile, SAW Corporate’s profits are starting to rise in its Office 365 advertising business as consumers begin to adopt its AI co-pilot more widely. With the first consumers proceeding to load seats, this is a smart sign for the business going forward. At $30 according to the business user according to the month, this is a great opportunity for expansion.
The action is now negotiated with an valued value / term ratio (p / e) less than 28 on the basis of analysts’ estimates for monetary year 2026. It is an equitable evaluation for software and cloud computing with Intelligent resources of a recurrent source of income and many opportunities of AI.
Overall, I think Microsoft’s results were generally solid. They did not live up to some high Azure expectations, but this is a company that is helping lead the way with AI. As such, I think long-term-focused investors can use the dip in the stock price to buy or add to positions for this enduring technology company.
Geoffrey Seiler has no position in any of the above moves. The Motley Fool recommends the following options: Long January 2026 calls $395 at Microsoft and the January 2026 court $405 calls Microsoft. The Motley Fool has a disclosure policy.
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