On October 31st, Caixin News Agency reported that Microsoft released its first quarter financial report for the fiscal year 2025 after hours yesterday (Microsoft's fiscal year is not synchronized with the natural year), achieving double-digit growth in performance. However, the expected growth of its cloud business Azure is slowing down. The market performance of the second quarter and the second half of the year in the financial report is of great concern.
According to financial report data, the company's revenue in the first quarter reached $65.585 billion, a sharp increase of 16% compared to the same period last year. Excluding the impact of exchange rate fluctuations, the year-on-year growth was also 16%; Net profit was 24.667 billion US dollars, a year-on-year increase of 11%, excluding the impact of exchange rate fluctuations, which was a year-on-year increase of 10%; Diluted earnings per share were $3.30, a year-on-year increase of 10%. Excluding the impact of exchange rates, both net profit and diluted earnings per share increased by 10% year-on-year.
From a business perspective, Microsoft's service and other business revenue increased to $50.313 billion this quarter, while product business revenue slightly declined to $15.272 billion.
In terms of cost, Microsoft's total revenue cost in the first quarter climbed to $20.099 billion, with a particularly significant increase in service and other revenue costs. Meanwhile, research and development, sales and marketing, as well as general administrative expenses, have all increased.
Overall, Microsoft performed strongly in the first quarter of fiscal year 2025, with all financial data showing a steady growth trend.
However, it is noteworthy that the growth expectations for Microsoft's core cloud business Azure have slowed down. This indicates that even large-scale investments in artificial intelligence are difficult to quickly break through the capacity bottleneck of data centers.
After the release of the financial report, Microsoft CEO Satya Nadella, Executive Vice President and CFO Amy Hood, Chief Accounting Officer Alice Jolla, and Deputy General Counsel Keith Dolliver and other company executives attended the subsequent financial conference call to interpret the key points of the report and answer analysts' questions.
Amy Hood said in a conference call, "In the first quarter, we achieved a growth rate of 34%, while we expected it to be 33%. The excess was mainly due to some revenue recognition reasons. I will look at this issue from the perspective of pure consumption and artificial intelligence. We expect a decline of one or two points, and the main reason is the supply delay that Satya and I mentioned. In terms of basic consumption growth, it was actually stable from the first quarter to the second quarter
He added, "In the second half of this fiscal year, our supply will increase significantly, especially in the field of artificial intelligence, which can better match supply and demand, and there will also be the growth acceleration we discussed in the second half of the year
Brett Iversen, Vice President of Investor Relations at Microsoft, revealed that the growth rate of 34% in the first quarter may drop to just over 30% in the second quarter, and the company expects to effectively address the AI capacity constraints in the second half of this fiscal year. As soon as this news was released, Microsoft's stock price fell 3.6% in after hours trading, giving up its previous gains.
Facebook's parent company Meta also announced better than expected performance on the same day, but warned that infrastructure spending related to artificial intelligence will increase significantly. This led to a 3.1% drop in its stock price after hours.
According to industry analysis firm Visible Alpha, Microsoft predicts that Azure's revenue growth in the second quarter will be between 31% and 32%, slightly lower than the market average expectation of 32.25%. In the first quarter, the artificial intelligence business contributed 12 percentage points to Azure's 33% revenue growth.
Microsoft has invested billions of dollars to strengthen its artificial intelligence infrastructure and expand its data center network. This quarter, Microsoft's capital expenditures are expected to increase to $20 billion, higher than the previous quarter's $19 billion and exceeding market expectations. However, this huge expenditure has raised concerns among some investors.
Since the beginning of this year, Microsoft's performance among large technology companies has been relatively weak, with a stock price increase of only over 15%, far lower than Meta's 68% and Amazon's 28%.