Microsoft cloud misses despite small beat on top and bottom

Microsoft shares fell as much as 2% in extended trading on Tuesday after the software maker reported softer cloud revenue than expected in its fiscal first-quarter.

Here's how the company did:

Total revenue grew 11% year over year in the quarter, according to a statement.

Microsoft's Intelligent Cloud business segment, which includes the Azure public cloud, as well as Windows Server, SQL Server, Nuance and Enterprise Services, generated $20.33 billion in quarterly revenue. That's up 20% and slightly less than the $20.36 billion consensus among analysts polled by StreetAccount.

Azure revenue grew 35% in the quarter, Microsoft said, compared with 40% growth in the previous quarter. Analysts polled by CNBC had expected 36.4% growth, while analysts surveyed by StreetAccount had been looking for 36.9% Azure growth.

The Productivity and Business Processes segment that contains Microsoft 365 productivity software subscriptions (the company is in the midst of rebranding the bundle from Office 365), LinkedIn and Dynamics, posted $16.47 billion in revenue, up 9% and above the $16.13 billion StreetAccount consensus.

Revenue from the More Personal Computing segment totaled $13.33 billion, down slightly and higher than the $13.12 billion StreetAccount consensus. The segment includes Windows, as well as Xbox, Surface and advertising from the Bing search engine.

During the quarter, Microsoft started rolling out the first annual update to its Windows 11 operating system since releasing the original version last year, and the company announced plans to slow down its pace of hiring said it was cutting less than 1% of employees. Microsoft also introduced Viva Engage, a portal in the Teams communication app where co-workers can share video stories.

The quarterly results will include small adjustments in the way that Microsoft reports revenue. Revenue from HoloLens augmented-reality devices will appear in the More Personal Computing segment instead of the Intelligent Cloud segment. Microsoft adjusted its forecast for the segments by about $100 million in connection with the change.

Notwithstanding the after-hours move, Microsoft shares have fallen about 26% so far this year, while the S&P 500 stock index is down 19% over the same period.

Executives will discuss the results and issue guidance on a conference call starting at 5:30 p.m. ET.

This is breaking news. Please check back for updates.

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