San Franciso, July 31(V7N) – Microsoft’s shares fell on Tuesday despite the company reporting a higher quarterly profit. The tech giant posted a profit of $22 billion on $64.7 billion in revenue for the recent quarter, a year-over-year increase. However, the company's cloud computing revenue of $36.8 billion fell short of expectations, causing shares to drop over three percent to $408 in after-hours trading.

 
The cloud sector has been a key driver of Microsoft's earnings, and any signs of slowing growth can significantly impact investor sentiment. "While there will be some knee-jerk reaction in Microsoft stock after hours, we believe the takeaways for the broader tech sector is this AI monetization story is real," said Dan Ives, an analyst at Wedbush.
 
Microsoft is investing heavily in artificial intelligence, including a $13 billion investment in OpenAI, the creator of ChatGPT. This push is aimed at enhancing AI capabilities across its products and services. Despite the cloud revenue shortfall, analysts from CFRA Research view Microsoft’s earnings as generally strong, with AI monetization showing incremental improvement.
 
In contrast, Google-parent Alphabet reported stronger-than-expected results, with its AI-enhanced cloud and search ad businesses outperforming. This has raised investor expectations for Microsoft's AI performance.
 
Microsoft's AI-integrated "Intelligent Cloud" unit saw a 19-percent revenue increase to $28.5 billion. CEO Satya Nadella emphasized the company’s commitment to long-term investments in innovation and AI.
 
The company also reported a significant rise in Xbox revenue by 61%, thanks to the Activision acquisition. Additionally, costs for attracting users to Microsoft's search and news services increased by 19%, highlighting the competitive pressures from Google.
 
Microsoft's fiscal year results showed a net income of $88.1 billion on $245.1 billion in revenue, reflecting strong growth in both areas.
 
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