Microsoft Cloud Revenue Hits $32.9B with Azure Growth Slowing to 31%
Microsoft’s Intelligent Cloud segment revenue rose 28% year-over-year to $32.9 billion in its latest quarter, driven by Azure and hybrid offerings but with a narrower gross margin due to increased AI infrastructure spending. Azure and cloud services revenue grew 31% year-over-year, decelerating from 35% and 39% in the prior two periods.
1. Intelligent Cloud Revenue Gains
Microsoft posted Intelligent Cloud sales of $32.9 billion, up 28% year-over-year, reflecting strong demand for its enterprise cloud offerings. However, gross margin in the segment contracted as AI infrastructure investments and datacenter build-out costs rose.
2. Azure Growth Deceleration
Azure and related cloud services revenue climbed 31% year-over-year, marking a slowdown from 35% growth in the previous quarter and 39% two quarters ago. The deceleration suggests heightened competition and maturing adoption cycles.
3. Margin Pressure from AI Investment
The company’s continued push into AI computing capacity and advanced hardware drove up operating costs, squeezing segment margins. Investor skepticism over return on these expenditures contributed to a muted stock reaction after earnings.