Microsoft (NASDAQ:MSFT) reported fiscal first-quarter results that exceeded Wall Street expectations, driven by solid performance in its cloud segment, Azure. However, shares dropped over 5% intra-day on Thursday due to softer guidance for Azure growth in the upcoming quarter. For Q1, Microsoft posted earnings per share of $3.30 on $40.59 billion in revenue, compared to the Street forecasts of $5.21 EPS on $40.18 billion in revenue. Azure saw a 33% growth, slightly above the expected 32%, but CFO Amy Hood indicated a projected slowdown in Azure’s growth to between 31% and 32% for Q2, which weighed on investor sentiment. AI services played a key role in Azure’s growth, contributing 12 percentage points, compared to 11 points last quarter, adding an estimated $1.5 billion in quarterly revenue, according to RBC Capital Markets. However, high capital expenditures, totaling $20 billion, added to concerns. Barclays analysts expressed caution over near-term growth prospects, noting that AI capacity constraints could limit Azure’s growth acceleration. They suggested that while re-acceleration may materialize in the second half of the fiscal year, the real impact will only be evident with Q3 results in April 2025, creating limited near-term excitement for investors.