Yesterday, Microsoft results were released. After the news, the shares immediately dropped over 6% in after-hours trading as headlines called it a ‘disappointing result’. Analysts referred to the result as ‘below expectations’ and questioned when investors would start to see a return on investment for the $US14 billion spent last quarter on AI (Artificial Intelligence) infrastructure.
Seems grim. Just how bad were their results?
Well, revenue was up 15% year–on-year. In their important Azure Cloud division, revenue was up 29% for the quarter with guidance for 2025 for growth ‘slowing’ to 28%. Profit was up 10% to $US22 billion. For the full year, revenue was $US245 billion and net income was $US88 billion.
This is an excellent result from an outstanding company. So why the drama and consternation?
Share markets and investors are incredibly short-sighted. The primary reason for the fall in the share price was that however well a company performs investors want more. The share price went up too much this year on expectations that were too high. Investors expected 31% revenue growth and were concerned about the level of capital expenditure for the quarter.
Microsoft is only just getting started in building out its capabilities to win the AI arms race. This is a multi-decade investment. It is madness to expect to see a return on investment on a quarter-by-quarter basis. This is where long-term investors need to look beyond the noise in the financial media and quarterly results. Understanding the big picture is critical.
General Advice Disclaimer: This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you. Historical performance is often not a reliable indicator of future performance. You should not rely solely on historical performance to make investment decisions.