Microsoft Corp. posted blockbuster fiscal second-quarter results on Tuesday, with revenue surging 17% to $81.3 billion and Microsoft Cloud revenue crossing $50 billion for the first time, propelled by 39% growth in Azure and other cloud services. Yet shares tumbled 5% in after-hours trading as investors fretted over a slight slowdown in cloud acceleration and soaring capital expenditures.

Operating income climbed 21% to $38.3 billion, while GAAP net income rocketed 60% to $38.5 billion, boosted by $7.6 billion in gains from investments in OpenAI after its restructuring. Non-GAAP net income rose 23% to $30.9 billion, with diluted EPS hitting $5.16 on a GAAP basis and $4.14 adjusted, trouncing estimates of $3.92. “Microsoft Cloud revenue crossed $50 billion this quarter, reflecting the strong demand for our portfolio of services,” said CFO Amy Hood, as reported by Microsoft Investor Relations.

CEO Satya Nadella emphasized the early stages of AI’s spread: “We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises.” Commercial remaining performance obligations ballooned 110% to $625 billion, with 45% tied to OpenAI including its $250 billion cloud commitment, per CNBC.

Azure’s Relentless Surge Powers Intelligent Cloud

The Intelligent Cloud segment delivered $32.9 billion in revenue, up 29% year-over-year, beating StreetAccount estimates of $32.4 billion. Azure’s 39% growth—38% in constant currency—met expectations but dipped slightly from 40% in the prior quarter, fueling the stock sell-off. Demand far outstrips supply, with Hood noting confidence in long-lived AI assets lasting 15 to 20 years, according to Tom’s Guide.

Analyst Brent Thill of Jefferies highlighted risks around OpenAI’s backlog contribution: “The backlog is really good, but the disclosure that OpenAI is 45% of their backlog, it goes back to the situation where, Can OpenAI achieve these financial goals?” Capital expenditures and finance leases hit $37.5 billion, exceeding Visible Alpha consensus of $34.3 billion, underscoring massive AI infrastructure bets.

Microsoft’s new Maia 200 chip for AI inference is now live globally on Azure, aiming to cut costs versus rivals and older models, as noted in pre-earnings coverage by Tom’s Guide. This positions the company to handle the inference economy’s demands.

Productivity Segment Delivers Steady Gains

Productivity and Business Processes revenue reached $34.1 billion, up 16% and topping estimates of $33.48 billion. Microsoft 365 Commercial cloud revenue grew 17%, Consumer subscribers 29%, LinkedIn 11%, and Dynamics 365 19%. Copilot adoption continues, with Nadella pushing agentic AI: “I feel actually, pretty good about both the progress in AI,” per Tom’s Guide.

Microsoft returned $12.7 billion to shareholders via dividends and buybacks, up 32% year-over-year. On X, analyst Ben Bajarin observed: “Investors wanted north of 40% Cloud business growth but still 39% is solid,” via @benbajarin.

Recent patches for Copilot vulnerabilities and a 48-hour Microsoft 365 outage underscore execution challenges amid rapid scaling.

Gaming and Devices Weigh on Personal Computing

More Personal Computing revenue fell 3% to $14.3 billion, missing estimates of $14.38 billion. Xbox content and services dropped 5%, amid reports of ongoing struggles including a next-gen console in development and Game Pass updates, as covered by Tom’s Guide. Windows OEM grew 1%, Search advertising ex-TAC rose 10%.

PC shipments rose 9.3% per Gartner, yet the segment lagged, highlighting divergence from cloud strength. Xbox faces competition from Sony’s PS5 and potential multi-store integration like Steam.

Post-earnings, X users like @Finsee_main noted: “Cloud Juggernaut Rolls On, Consumer Hardware Brakes Hard.”

Investor Jitters Amid Skyrocketing Spend

Despite beats, shares slid as Azure’s tick down signaled potential moderation. Capex ramp reflects data center builds with custom chips, leasing from CoreWeave and Nebius. Anthropic’s $30 billion cloud deal adds to momentum.

Microsoft raised commercial Office prices, betting on AI upsell. X reactions mix optimism on backlog with capex concerns: “Demand remains significantly ahead of capacity,” echoed in posts.

The quarter validates Microsoft’s AI pivot, but physics—supply constraints—and costs test investor patience. Forward guidance from the call will shape the narrative.