Microsoft's Earnings Beat Isn't Enough? Stock Slides Over 6% As Investors Want Proof AI Bet Is Paying Off, Here's What Amy Hood Said - Microsoft (NASDAQ:MSFT)

Core Viewpoint - Microsoft reported strong second-quarter earnings with a 24% year-over-year increase in EPS, but shares fell 6.14% in after-hours trading due to concerns over rising capital expenditures related to AI and slightly below expectations for Azure cloud growth [1][2]. Financial Performance - Microsoft achieved second-quarter revenue of $81.3 billion, a 21% increase from the previous year, surpassing the consensus estimate of $80.25 billion [7]. - Capital spending for the quarter totaled $37.5 billion, with approximately two-thirds allocated to short-lived assets like GPUs and CPUs, and finance leases related to data center investments amounting to $6.7 billion [8]. - Azure and other cloud services saw a 39% year-over-year revenue increase [8]. Market Reaction and Analyst Concerns - The market's negative reaction was attributed to concerns about the rapid acceleration of AI-related capital expenditures and Azure's growth falling slightly short of high expectations [2]. - Analysts expressed worries regarding the return on Microsoft's significant AI investments and their impact on Azure's growth over time [3]. Management's Perspective - CFO Amy Hood indicated that investors might be overly linking AI infrastructure spending directly to Azure revenue, emphasizing that investments are spread across the entire AI stack, including Microsoft 365 Copilot and GitHub Copilot [4][5]. - CEO Satya Nadella urged investors to consider AI spending in terms of long-term value rather than immediate cloud metrics, highlighting a strategy to build a diverse portfolio of high-margin businesses [6]. Future Outlook - Microsoft forecasts third-quarter revenue between $80.65 billion and $81.75 billion, with foreign exchange expected to contribute approximately three percentage points to year-over-year growth [9].