Microsoft missed guidance expectations

Microsoft's shares experienced a decline of up to 4% in after-hours trading on Tuesday due to the company's quarterly revenue guidance falling short of analysts' expectations.

Here are the key highlights from Microsoft's performance:

• Earnings came in at $2.69 per share, surpassing the expected $2.55 per share.

• Revenue amounted to $56.19 billion, higher than the expected $55.47 billion.

During a conference call with analysts, Amy Hood, Microsoft's finance chief, projected fiscal first-quarter revenue to be in the range of $53.8 billion to $54.8 billion. However, this estimate of 8% growth fell below the analysts' consensus of $54.94 billion. The segment featuring the Windows operating system also missed expectations, with revenue projected to be between $12.5 billion to $12.9 billion, below the expected $13.22 billion.

Overall, revenue saw an 8% increase year over year in the fiscal fourth quarter, ending on June 30. This marks the first time since 2017 that growth remained below 10% for three consecutive quarters. Net income reached $20.08 billion, up from $16.74 billion, or $2.23 per share, in the same period last year.

The Intelligent Cloud segment, which includes Azure, performed well, generating $23.99 billion in revenue, surpassing the consensus of $23.79 billion. Azure's revenue grew by 26% during the quarter, outpacing the growth from the previous quarter (27%) and the year-ago quarter (40%).

Microsoft CEO Satya Nadella announced that Microsoft Cloud had achieved over $110 billion in annual revenue, with Azure accounting for more than 50% of the total for the first time.

The More Personal Computing segment, which includes Windows, devices, gaming, and search advertising, reported $13.91 billion in revenue, showing a 4% decline year over year, but still surpassing the consensus of $13.58 billion.

Microsoft's research and development costs decreased year over year for the first time since 2016, and the company implemented cost-cutting measures, including job cuts.

The company's alliance with OpenAI to capitalize on the growing interest in artificial intelligence has shown progress, with over 11,000 customers using Microsoft's Azure OpenAI Service, up from over 4,500 in May.

Investors are eagerly awaiting the resolution of Microsoft's agreement to acquire Activision Blizzard for almost $69 billion, with optimism that the deal will close successfully.

Overall, Microsoft's shares have gained 46% year to date, outperforming the S&P 500's 19% increase.