TMTPOST --   Microsoft Corporation   stock   slid   as much   as 5%   in late trading   as   the software giant ’ s financial results   raised new   concerns over artificial intelligence   ( AI )   infrastructure cost   and overshadowed   quarterly   sales   beat.

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Microsoft reported double-digit   growth of   top and bottom line   for its   first   fiscal   quarter ended September 30. Revenue jumped 18% year-over-year ( YoY ) to $77.67   billion, shattering   Wall Street estimated $75.55   billion. That marks   the company record   the highest revenue   growth since the end of 2023   for two quarters in a row. Diluted earnings per share ( EPS ) for the September   quarter climbed 13% to $3.72, cooling from the grow   rate of 24%   three months   earlier   and still topping analysts ’   projection   of $3.67.

Microsoft cloud business, which is currently most evidently benefiting from generative AI applications, also beat analysts ’   estimates. The commercial cloud brought $49.1   billion from July   to September, representing a YoY surge of 26%. Analysts anticipated the segment recorded $48.6   billion of revenue. Microsoft Intelligent Cloud, which also includes the core cloud platform Azure, saw revenue gained 28% YoY to $30.9   billion, ahead of Wall Street estimate of $30.18   billion.

Revenue from Azure and other cloud services delivered a YoY increase of 39%   when adjusting   for currency fluctuations. The   growth, same   as   that of three   months ago, topped   the consensus analysts projection   of 37%. But investor   expectations for Microsoft were very high heading into earnings, with some buyside bogeys as high as the low 40s.  

"We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share," said Amy Hood,   chief financial officer   ( CFO )   of Microsoft. "Continued strength in the Microsoft Cloud reflects the growing customer demand for our differentiated platform."

Microsot posted a steeper climb in spending than Wall Street anticipated, fueling anxieties about the high costs of providing AI infrastructure. The September quarter saw captial expenditure, or Capex, including finance leases, an indication of data center spending,   refreshed   a record at $34.9 billion,   while analysts projected to be $30.06 billion. The Capex   was   up about $10   billion,   or   more than 60%,   from the previous record set during the previous quarter,   and surged 74.5%   from a year ago.

Microsoft CEO Satya Nadella   said   his company will continue to increase our investments in AI across   both   capital and talent   as its planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact.

Hood said   at an earnings call that the Capex will increase again in the current fiscal quarter. She told analysts Microsoft still failed to address   a computing capacity   crunch   despite massive spending on AI datacenters. Demand for Azure services is "significantly ahead of the capacity we have available," she said. "I thought we were going to catch up," Hood added. "We are not."

Looking forward   the   current quarter,   Microsoft expected revenue to be between $79.5 billion and $80.6 billion.   Hood   said revenue from Azure in constant currency will   grow about 37%. That means   Azure sales growth would cool   from   39%   for the previous two quarters, the   fastest   growth rate since the late   of 2022.