Following Microsoft’s (MSFT) impressive fiscal first-quarter earnings, CFO Amy Hood reported that AI demand is outpacing the company’s current capacity. Microsoft’s Intelligent Cloud segment, which includes its Azure cloud platform, saw a 20% revenue increase year-over-year, reaching $24.09 billion, primarily fueled by surging interest in AI. However, stock prices dipped slightly after Microsoft cautioned about a potential slowdown in growth for the second quarter.
Azure AI Business Breaks Growth Records
CEO Satya Nadella noted that usage of Azure’s OpenAI service has doubled over the past six months. The AI division is set to reach a $10 billion annual revenue run rate in the second quarter, marking the fastest growth trajectory for any business in Microsoft’s history. Nadella emphasized that AI is revolutionizing business applications as companies increasingly pivot from traditional software to AI-driven processes.
Cloud Expansion Expected to Moderate Before Accelerating in 2025
Microsoft expects Intelligent Cloud growth to moderate to 18%-20% in the second quarter, with Azure’s growth forecasted to slow to 31%-32% before accelerating again in the latter half of the fiscal year. Despite a 5% drop in share value after the earnings call, Microsoft’s stock remains up over 8% year-to-date.