Microsoft tops Q1 expectations as cloud shines but stock slides

Core Insights - Microsoft reported strong first quarter earnings, exceeding analysts' expectations with commercial cloud revenue of $49.1 billion, a 26% year-over-year increase [1][3] - The company's capital expenditures rose significantly by 74% year-over-year to $34.9 billion, with half attributed to GPUs and CPUs for Azure [2] - Microsoft experienced a stock decline of over 2% following the earnings report, despite reporting earnings per share (EPS) of $3.72 on revenue of $77.7 billion, surpassing analyst expectations [3][4] Financial Performance - The earnings per share (EPS) for the quarter was $3.72, compared to an anticipated EPS of $3.68, with revenue reported at $77.7 billion against an expected $75.5 billion [3] - In the same quarter last year, Microsoft reported an EPS of $3.30 and revenue of $65.6 billion [4] - Intelligent Cloud revenue, which includes Azure sales, reached $30.9 billion, exceeding Wall Street's expectation of $30.2 billion [4] Strategic Developments - Microsoft and OpenAI announced a revamped deal allowing OpenAI to restructure into a for-profit public benefit corporation, with Microsoft holding a 27% stake valued at approximately $135 billion [5] - Microsoft has invested billions in OpenAI, which has enhanced its software capabilities through Microsoft's Azure platform, contributing to revenue growth [6] - The new agreement allows OpenAI to utilize other cloud providers while committing to spend $250 billion on Azure usage [8] Product and Service Expansion - Microsoft is expanding its AI offerings, including the introduction of Copilot for PCs and updates to Windows 11 that enable voice interaction with the Copilot AI chatbot [8] - Copilot is also being integrated into Xbox gaming applications, indicating a broader strategy to enhance consumer engagement through AI [8]