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Microsoft’s AI revenue grows, but its stock falls on lower guidance and concerns over spending
- Microsoft has posted Q2 2025 earnings of $69.63bn, beating analyst expectations.
- Its overall cloud computing business fell just short of analyst estimates and the Q1 2025 guidance was also low.
- Microsoft's capital expenditures for the quarter reached a record high of $22.6bn due to increased demand for its AI and cloud offerings.
- Revenue from Azure and other cloud services was up 31% YoY, with 13% of that attributed to AI services.
- While Azure's overall growth rate was lower than analysts had expected, the company's AI products and services have now hit an annual run rate of $13bn.
- DeepSeek, a Chinese AI start-up, has triggered scrutiny about the millions of dollars spent by companies like Microsoft on AI infrastructure.
- Microsoft has committed to spending $80bn on AI infrastructure this year, and CEO, Satya Nadella, said DeepSeek's R1 model will be available through its Azure AI Platform.
- Nadella said his team has also demonstrated significant efficiency gains in both training and inference for years.
- Microsoft's stock fell by more than 4% in extended trading after the Q2 earnings report was released.
- Prior to the report, Microsoft's stock was up by 5% for the year to date.
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