Microsoft shares dipped 1.8% in after-hours trading Wednesday — despite the company delivering a third-quarter earnings report that comfortably beat Wall Street's expectations.
For the quarter ending March 31, Microsoft reported adjusted earnings of $4.27 per share on revenue of $82.89 billion, up 18% year-over-year (15% in constant currency). Net income came in at $31.78 billion, or $4.27 per share, compared to $25.82 billion, or $3.46 per share, a year earlier. The adjusted figure excludes a $14 million net income reduction from Microsoft's OpenAI investment.
The Intelligent Cloud segment, which includes Azure, contributed $34.7 billion in revenue. Microsoft said Azure revenue grew 40% year-over-year, or 39% in constant currency.
Overall cloud-related revenue hit $54.5 billion for the quarter. Productivity and Business Processes revenue was $35 billion, with Microsoft 365 Commercial cloud revenue up 19% (15% constant currency), Microsoft 365 Consumer cloud up 33% (29% constant currency), LinkedIn revenue up 12% (9% constant currency), and Dynamics 365 revenue up 22% (17% constant currency).
The More Personal Computing segment, which includes Xbox, Activision, Windows, and Surface, brought in $13.2 billion.
Analysts had expected adjusted earnings of $4.05 per share on $81.46 billion in revenue.
Seeking Alpha analyst Michael Del Monte called the results "encouraging," noting that remaining performance obligations stood at $627 billion and the "cloud growth story remains intact."
"We are committed to delivering cloud and AI infrastructure and solutions that help every organization maximize their performance in the era of intelligent computing," said CEO and Chairman Satya Nadella. "Our AI business has surpassed $37 billion in annual revenue, growing 123% year-over-year."
CFO Amy Hood added: "We delivered above expectations on revenue, operating income, and earnings per share, reflecting strong execution and growing demand for the Microsoft Cloud."
Microsoft's cloud growth is also tied to its OpenAI partnership, which recently saw changes allowing OpenAI to use other cloud providers. The company has also been pushing open-source AI tools, like a speech recognition model that can transcribe hour-long audio in one go.