Why Microsoft Stock Was Wilting on Wednesday
What happened
Although Microsoft (NASDAQ: MSFT) posted estimate-beating quarterly results the previous day, its stock wasn't doing well on Wednesday. On concerns about a key part of the business, Microsoft's share price was down by more than 4% in midafternoon trading. That compared unfavorably to the S&P 500 index's slight 0.2% decline.
So what
Microsoft unveiled its fourth-quarter 2023 figures after market hours on Tuesday. For the period, revenue was $56.2 billion, an 8% improvement on a year-over-year basis. Net income according to generally accepted accounting principles (GAAP) also rose, climbing almost 20% to land at just over $20 billion ($2.69 per share).
Both headline numbers comfortably beat the consensus analyst estimates for $55.4 billion in revenue and $2.55 per share.
While the top- and bottom-line beats were comforting, there were certain areas of concern in Microsoft's results.
Arguably the most important one was its crucial intelligent-cloud division, which operates the Azure cloud service. This has been the motor of growth for the company, and although its revenue rose by 26% during the quarter, that figure was 1 percentage point higher in the third quarter. Zooming out slightly, those growth rates have consistently declined for several quarters in a row.
Now what
Investors don't like when a top-growing division shows any sign of slowing down, so their reaction to Microsoft's news was understandable.
It does seem a bit overblown, though. After all, the company remains not only a powerhouse in cloud computing, but it also has its fingers deep in other tech pies and is a leader in commercial artificial intelligence thanks to its investment in ChatGPT developer OpenAI.
10 stocks we like better than Microsoft
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Microsoft wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of July 17, 2023
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
