Microsoft dips after forecast of slower Azure cloud growth in Q2

Microsoft’s (NASDAQ:MSFT) stock fell about 4% premarket on Thursday after the company trimmed down revenue expectations for its Azure cloud service for the second quarter.

“In Azure, we expect Q2 revenue growth to be 31% to 32% in constant currency, driven by strong demand for our portfolio of services,” said CFO Amy Hood on the company’s earnings call.

The figure is down from 34% in the first quarter.

“We expect consumption growth to be stable compared to Q1, and we expect to add more sequential dollars to Azure than any other quarter in history,” Hood added.

Answering to a query related to the 34% growth in the first quarter falling to low 30s, Hood said “in Q1, the 34% in CC, as we talked about, that upside versus the 33% that we had guided to was primarily due to some revenue recognition benefits. And so, I think about that on a sort of a pure consumption basis and AI as being 33%.”

Hood noted that the 1 or 2 point deceleration Microsoft has guided is mainly due to some supply push outs, in terms of AI supply coming online that the company counted on.

“I do, as you heard, have confidence as we get a good influx of supply across the second half of the year, particularly on the AI side that we’ll be better able to do some supply-demand matching,” Hood commented. “The importance of having GPUs and CPUs be able to run these workloads is also important. So that’s a piece of the acceleration in H2 as well.”