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

On Wednesday, Microsoft Corp. (NASDAQ:MSFT) reported better-than-expected second-quarter earnings, with EPS up 24% year over year, but the strong print failed to calm Wall Street as shares slid 6.14% in after-hours trading.

Strong Earnings, Weak Market Reaction

The selloff came despite solid revenue growth and expanding margins, underscoring investor unease about Microsoft's rapidly rising capital expenditures tied to artificial intelligence.

Analysts pointed to two key concerns: AI-related CapEx accelerating faster than expected and Azure cloud growth coming in slightly below lofty expectations.

During the earnings call, Morgan Stanley analyst Keith Weiss summed up the market's worry, asking executives how investors should think about the return on Microsoft's heavy AI investments and what those spending levels could realistically deliver for Azure growth over time.

Amy Hood Pushes Back On CapEx-Azure Link

Microsoft CFO Amy Hood said investors may be drawing too direct a line between AI infrastructure spending and Azure revenue alone.

She said that Microsoft's GPU and data center investments are being allocated across the company's entire AI stack, not just Azure.

That includes Microsoft 365 Copilot, GitHub Copilot and other first-party AI products, as well as internal research and development.

"It’s probably better to think about the Azure guidance that we give as an allocated capacity guide for what we can deliver," Hood said, adding that AI infrastructure decisions are long-term by nature.

Hood also noted that if Microsoft had directed all newly deployed GPUs solely toward Azure in recent quarters, cloud growth would have been significantly higher.

Instead, the company chose to balance capacity across products with strong long-term value.

Nadella: Microsoft Is Optimizing For Long-Term Value

CEO Satya Nadella echoed that message, urging investors to view AI spending through the lens of lifetime value rather than short-term cloud metrics.

He said Microsoft is deliberately allocating scarce AI capacity to build a broader portfolio of high-margin businesses, including Copilot offerings across productivity, security and developer tools.

"We don't want to maximize just one business," Nadella said. "We want to be able to allocate capacity while we’re sort of supply constrained in a way that allows to essentially build the best LTV portfolio."

Microsoft Revenue Beats Estimates As AI-Driven CapEx Surges

Microsoft posted second-quarter revenue of $81.3 billion, marking a 21% increase from a year earlier and topping the Street's consensus estimate of $80.25 billion, according to Benzinga Pro data.

Capital spending totaled $37.5 billion during the quarter, with about two-thirds directed toward short-lived assets such as GPUs and CPUs, while finance leases—largely tied to large-scale data center investments—came in at $6.7 billion.

The company reported a 39% year-over-year increase in revenue from Azure and its other cloud services.

Looking ahead, Microsoft forecasts fiscal third-quarter revenue in the range of $80.65 billion to $81.75 billion, with foreign exchange expected to add roughly three percentage points to year-over-year growth.

MSFT maintains a weak price trend over the short, medium and long terms with a poor Value and Momentum ranking. Additional performance details, as per Benzinga’s Edge Stock Rankings.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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