MSFT: Microsoft Stock Falls as Piling AI Expenses Overshadow Strong Earnings Report

Software giant delivered a double beat but mounting expenses threatened to upend profitability, leading to the stock’s decline.

• Microsoft stock MSFT was down 4% in pre-market trading Thursday after the company posted strong third-quarter earnings but spoiled the mood with piling costs. The software giant raked in $3.30 in earnings per share, topping analysts’ calls for $3.10 and brought in revenue of $65.59 billion, up 16% year over year and beating Wall Street estimates for $64.51 billion. Net income jumped 11% to $24.67 billion from $22.29 billion in the year-ago quarter.
• ”AI-driven transformation is changing work... and workflow across every role, function, and business process," said Microsoft CEO Satya Nadella. He also added that the software giant was forming new business relationships over solid AI products and promising growth prospects. But mounting costs to handle all that AI development forced investors to reconsider their long positions, leading to the implied loss at the opening bell.
• For the September quarter, Microsoft said its capital expenditures piled to $14.9 billion, largely thanks to aggressive spending on AI datacenters. The figure was up 50% from the same quarter a year ago. But the returns aren’t too handsome — revenue from AI business, Microsoft said, is expected to hit $10 billion this quarter. It also warned that revenue for the current quarter might not be as impressive as expected. Shares of Microsoft are up 17% year-to-date.