Microsoft's second-quarter earnings report revealed strong performance in its AI business, reaching an annual revenue run rate of $13 billion, up 175% year-over-year. However, this growth was insufficient to meet analysts' expectations for Azure and cloud computing sales, which grew 31% compared to the anticipated 31.8%. Following the announcement of a new AI model by competitor DeepSeek, Microsoft also experienced a stock decline, reflecting increased scrutiny on its substantial investments in AI amid a competitive landscape.
Microsoft's earnings on Wednesday showed strong growth in its AI business - just not enough to reassure investors.
Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year.
Tech executives, including Nadella, were expected to face scrutiny this earnings cycle about spending billions of dollars to build AI capabilities.
Microsoft was one of several companies whose stocks fell on Monday after DeepSeek revealed its model.
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