💻 Microsoft: Azure Slowdown
But wait, there's more!
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In case you missed it:
Microsoft (MSFT) just reported its Q4 FY24 (ending in June).
The market wasn’t thrilled, with the stock initially taking an 8% dip.
In the current AI arms race, investors have narrowly focused on a specific performance indicator from Microsoft: Azure and other cloud services.
So what’s going on?
📉 Azure decelerated: Azure grew 30% in constant currency. While that’s nothing to scoff at, it came on the low end of the 30%-31% guidance. It was a slight slow down from 31% in the prior quarter.
📈 Meanwhile, Google Cloud accelerated: Alphabet just reported that its Cloud unit grew 29% in the same quarter, a 1-point acceleration. The comparison is not perfect, but momentum favored Google this time.
But hold on a minute. CFO Amy Hood shed light on a key factor during the earnings call. Part of the AI growth is supply-constrained, with hardware capacity not keeping up with demand for AI solutions. Microsoft is pouring billions into its infrastructure to catch up, and growth could reaccelerate in 2025.
Let’s break down what we learned from the earnings, visualizing the latest trends.
Today at a glance:
Microsoft Q4 FY24.
Blue screen of death.
Earnings call takeaways.
OpenAI and Consumer AI.
1. Microsoft Q4 FY24
Microsoft completed its purchase of Activision Blizzard in October 2023. Excluding the acquisition, the company's overall revenue grew by 12% year-over-year.
Azure—Microsoft’s cloud computing platform and infrastructure—is included in ‘Server products and cloud services.’ Management shares Azure's growth rate but doesn’t disclose the exact revenue number.
☁️ Server products and cloud services $26.6 billion (+21% Y/Y).
📊 Office products and cloud services $14.3 billion (+11% Y/Y).
🪟 Windows $6.5 billion (+7% Y/Y).
🎮 Gaming $5.0 billion (+44% Y/Y), including 48 points from Activision.
👔 LinkedIn $4.3 billion (+9% Y/Y).
🔎 Search and news advertising $3.2 billion (+5% Y/Y).
🔒 Enterprise and partner services $1.9 billion (-7% Y/Y).
📈 Dynamics $1.7 billion (+16% Y/Y).
💻 Devices $1.2 billion (-11% Y/Y).
Let’s turn to the three core business segments.