Microsoft’s shares declined 3.8% in after-hours trading despite reporting substantial quarterly gains, as warnings about slowing growth and escalating artificial intelligence costs dampened investor enthusiasm.
The technology giant’s fiscal first-quarter revenue climbed 16% year-on-year to £65.6 billion, surpassing analysts’ projections of £64.5 billion. Net income rose 11% to £24.7 billion in the September-ending quarter, exceeding market expectations of £23.1 billion.
Chief Executive Satya Nadella’s strategic AI investments have positioned Microsoft at the forefront of technological innovation, particularly through its partnership with OpenAI. The company disclosed a £13 billion investment in the ChatGPT creator, though this relationship resulted in a £683 million quarterly loss from equity-method investments.
Capital expenditure nearly doubled to £20 billion compared to the previous year, reflecting massive investments in data centre infrastructure. Microsoft’s ambitious AI expansion has led to unprecedented power requirements, prompting the company to explore nuclear energy solutions, including the revival of the Three Mile Island plant.
The Azure cloud division, while posting a robust 33% revenue increase, is expected to see growth moderate to 31-32% in the second quarter. This outlook, combined with rising infrastructure costs, contributed to the share price decline despite AI services now accounting for 12 percentage points of Azure’s quarterly growth.
Microsoft’s AI products are projected to generate £10 billion in annual revenue, marking the fastest-growing business segment in the company’s history. The tech giant continues to expand its AI portfolio through strategic investments, including a £1.5 billion stake in Abu Dhabi’s G42, while developing proprietary AI solutions under former Inflection executive Mustafa Suleyman.
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