Microsoft's Q4 2024 Earnings: Cloud Growth Slows, AI Takes Center Stage

Microsoft's Q4 2024 Earnings: Cloud Growth Slows, AI Takes Center StageAfter the market closed on Tuesday, Microsoft released its financial results for the fourth quarter of fiscal year 2024, ending June 30, 2024. Overall, the company's Q4 performance beat analysts' expectations, but slower cloud computing growth raised concerns among investors

Microsoft's Q4 2024 Earnings: Cloud Growth Slows, AI Takes Center Stage

After the market closed on Tuesday, Microsoft released its financial results for the fourth quarter of fiscal year 2024, ending June 30, 2024. Overall, the company's Q4 performance beat analysts' expectations, but slower cloud computing growth raised concerns among investors.

Revenue and Profit Grow, Cloud Growth Slows

Microsoft's Q4 revenue reached $64.73 billion, representing a 15% year-over-year increase and exceeding analyst estimates of $64.39 billion. Net income came in at $22.04 billion, up 10% year-over-year, with earnings per share at $2.95, slightly higher than the average analyst prediction of $2.93.

For the full fiscal year 2024, Microsoft reported revenue of $245.12 billion, a 16% increase compared to the previous fiscal year. Net income reached $88.14 billion, marking a 22% year-over-year growth. Earnings per share for the year totaled $11.8.

Despite the strong overall performance, Microsoft's cloud computing business fell short of expectations. Microsoft's Intelligent Cloud segment generated revenue of $28.52 billion in Q4, representing a 19% year-over-year increase, falling slightly below analyst estimates of $28.68 billion. Revenue from Azure and other cloud services grew by 29% year-over-year, lower than the 31% growth anticipated by analysts.

AI Emerges as a Growth Engine, Azure Market Share Continues to Rise

While cloud growth slowed, Microsoft's investment and progress in artificial intelligence stood out as a highlight in the earnings report. Microsoft stated that 8% of the 29% year-over-year growth in Azure and other cloud services revenue in Q4 was driven by AI services. Satya Nadella, Microsoft's CEO, emphasized, "Driven by AI, our market share is accelerating this year."

Carl Kirstead, an analyst at UBS, believes Microsoft is capturing more market share from Google and Amazon. He stated, "In terms of the share shift between AWS, Microsoft Azure, and Google Cloud, the biggest consensus coming out of this round of conversations is that many customers and partners believe that Microsoft's early lead in AI is driving continued market-share gains."

PC Market Steady, Surface Line Adds AI Features

Microsoft's More Personal Computing segment contributed $15.9 billion in revenue during Q4, an increase of 14% year-over-year, driven by the steady growth in the PC market. Gartner, a technology research firm, estimates that PC shipments grew by 1.9% during the quarter, higher than the 0.9% growth recorded in the previous quarter.

Microsoft has started selling Surface PCs equipped with AI features, enabling them to run certain AI models locally without an internet connection. Dell, HP, and other device manufacturers are also promoting their Copilot+ PCs. Nadella mentioned in a news conference in May: "Weve created real joy and wonder for the PC."

Stock Performance Stable, Future Potential Remains Significant

Excluding after-hours trading, Microsoft's stock has risen by 12% since the beginning of 2024, compared to a 13% increase in the S&P 500 index during the same period. In the same timeframe, Google's stock has risen by 22%, and Amazon's stock has increased by 23%.

While Microsoft has never missed analysts' expectations in the past, the performance of its Azure business continues to be a focus of market attention this year. In the increasingly competitive generative AI landscape, Microsoft is vying with Amazon Web Services (AWS) and Google. All three companies are stepping up their investments to improve AI performance and attract more startups and large enterprises.

Microsoft's investment and progress in AI have laid a solid foundation for its future growth. As AI technology continues to develop and its application scenarios expand, Microsoft is well-positioned to maintain strong growth in the coming years.

Summary

Microsoft's Q4 2024 earnings demonstrate a solid overall performance with growth in both revenue and profit. While cloud computing growth has slowed, the strong performance of its AI segment provides new momentum for Microsoft's future development. As AI technology matures, Microsoft is poised to maintain a leading position in the years to come.

Disclaimer: This information is for reference only and does not constitute any investment advice.