Microsoft reported its second quarter earnings yesterday and beat both top and bottom lines of Wall Street estimates as for the first time cloud revenue is estimated at $50 billion. The company’s stock fell by more than 4%.
CEO of Microsoft while commenting on this earnings report stated that “they are in the early phase of Ai integration and Microsoft has already established one of the largest AI business in comparison to other big franchises”.
He further added that they are pushing the frontiers across the whole AI stack to bring added value for our partners and customers.
Microsoft is one the biggest companies that are taking advantage of this ongoing AI explosion. He was contented that they had made adequate investments in ChatGPT developer OpenAI and played a significant role in boosting its market capitalization to more than $4 trillion in July.
These huge investments raise increasing concerns among investors about the massive spending in the AI industry. In Q2 earnings per share (EPS) of $5.16 on revenue of $81.27 billion topped the $3.92 and $80.3 billion Wall Street was anticipating
Microsoft cloud revenue was estimated at $51.5 billion, exceeding the expected revenue of $51.2 billion. Moreover, the company reported the cloud revenue of $40.9 billion within the similar period last year.
On the other hand, Microsoft’s Productivity and Business Processes, which constitutes revenue from Consumer Cloud and Microsoft 365 Commercial recorded at $34.1 billion revenue against the Wall Street’s expectations of $33.6 billion.
Similarly, the company’s Intelligent Cloud Business, including Azure sales brought revenue of $32.9 billion, outperforming the estimates of $32.2 billion.
In Remaining Performance Obligations (RPOs) or the value of contracts Microsoft possess customers who have not paid yet recorded $625 billion. It is estimated that 45% of this owes to OpenAI commitments. The number is a key metric to assist Wall Street better measure the AI demand.
While discussing challenges faced by the Company Nadella argued that Microsoft is continually facing AI capacity constraints. This means that the customer demand for AI is outstripping the Microsoft’s capability to supply it, which places an artificial cap on the revenue.
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This is the reason, the company is investing billions into capital expenditures which are estimated around $37.5 billion in quarter, increased from $22.6 billion in the second quarter of 2025.
The company’s Personal Computing Business consisting of sales of its Xbox and Surface products along with Windows software generated a revenue of $14.3 billion, aligned with the expectations.
Microsoft’s stock price was increased by just 7% during the previous 12 months, slightly outstanding the Amazon, which is only 2% up within the similar period.
However, both Microsoft and Amazon are harshly blown away by Google as its stocks are increased to 69% during the previous 12 months.
Most of the growth is attributed to its Google Gemini 3, which has established the company as a leader in developing AI models as compared to Microsoft and OpenAI.
