Microsoft share prices dipped four percent on Wednesday after the company reported lower than expected second-quarter earnings. The quarter revenue came to $32.47 billion which is lesser than the $32.51 billion predicted by analysts. The earning per share also took a dip to $1.10 per share compared to the expected $1.09 per share. Although Microsoft did not disclose the exact revenue for the Azure cloud business which has contributed a lot to the company’s success in previous years, Microsoft did state that Azure has grown by 76% which is flat sequentially compared to the previous quarter.
With comments from Juniper, Intel, and other companies about spending on infrastructure, Microsoft investors are concerned about this effect on Azure. According to Brent Bracelin, chief analyst at KeyBanc Capital Markets, only 74 percent growth was expected with $2.85 billion in revenue. According to the reports, Microsoft collected $9 billion as revenue from the Commercial Cloud category, which also includes the commercial subscriptions to Office 365, Azure public cloud, Enterprise Mobility, commercial LinkedIn services as well as Security products. The unit was up by 48 percent, which reflected a sequentially higher growth rate from the forty-seven percent one quarter ago. Bracelin had also predicted that it would rise 44.8 percent.
Azure is right behind Amazon Web service for cloud infrastructure. This technology allows companies and businesses to offload their data storage and computing. Bracelin predicted that Azure would contribute about $2.85 billion in the last quarter. This implied only 74 percent growth, which is sequentially lower than the previous quarter. Amazon will be publishing its report tomorrow. However, analysts have predicted revenue of $7.3 billion for Amazon in this quarter.
Bracelin does not believe that Azure will be able to catch up with Amazon in the coming five years. However, he predicts Azure to become bigger in ten years if AWS remains a part of Amazon. He believes that Amazon.com’s ambitions put a hold on the opportunities for AWS to grow. More Personal Computing, Microsoft’s top business segment hit only $12.99 billion in revenue, which is lesser than the $13.08 billion estimated by analysts.
With the revenue from Windows devices dropping five percent, this has become the worst results in the past two years. The Productivity and Business Process Segment of the company also generated less revenue than was estimated by the analysts at FactSet. Microsoft announced a few noteworthy cloud deals in the quarter including Walgreens and Gap.