Microsoft stock dips despite beating Q1 earnings, revenue estimates

Yahoo Finance tech editor Dan Howley breaks down Microsoft's first-quarter earnings results, which were a beat on both the top and bottom lines.

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SEANA SMITH: We have some breaking news. Microsoft earnings are out. Dan Howley has the numbers for us. Hey, Dan.

DAN HOWLEY: That's right, Seana. We saw a beat for the top and bottom line here for Microsoft. Revenue came in at 50.1 billion versus 49.6 billion expected. We saw earnings per share of $2.35 versus $2.29 expected. We also saw beats in the productivity business and processes in line with the Intelligent Cloud business. And then we also saw more personal computing actually beat with $13.33 billion in revenue. That was compared to $13.1 billion in revenue that was expected.

This all comes as we've seen a collapse in the spending on PCs across the spectrum. We've seen Intel obviously struck by this, AMD struck by this, Nvidia struck by this. Cloud spending, though, for Microsoft was at 20% growth in Q1. That is a drop from 31% growth in Q1 last year. And we've seen that kind of continue to fall. It was 31% in Q1 2022. This is their fiscal Q1, obviously. 26% in the Q2 and Q3, and then down at 20% growth in Q4.

So we're seeing that kind of growth really kind of continuing to fall year over year and staying stable quarter over quarter, but a little bit lower than prior quarters for Microsoft there. So the cloud business doing all right, but not having that kind of growth that people are expecting. And as a result, we're seeing shares down around 1 and 1/2%.

SEANA SMITH: Yeah, Azure revenue growth, Dan, 35% in the most recent quarter. That was compared to 40% growth in the previous quarter. Taking a look, though, at the headline numbers, EPS and revenue both beating the Street's estimates, Dave, 50.1 billion on revenue, 235 on EPS. But cloud, it was a focus going into these results, and obviously, the focus here and the big reason, like Dan said, why shares are falling. That miss in terms of what the Street was looking for when it comes to cloud is what's weighing on shares right now.

DAVE BRIGGS: Yeah, the big surprise there. We certainly all expected that to be strength-- leading strength there with the Azure, but not the case. PC sales have been overall just a bit of a headwind there, down 18%, and really surprising, I think, especially when we're going to get to Alphabet here in a moment. But surprising considering what we're seeing for them versus expectations.

The strength in the dollar, it'll be interesting to hear the commentary on the call to hear how the strength of the dollar did impact their overall numbers. We do have a quote from Sundar Pichai, the CEO of-- oh, that's-- no, we're going to get that from Alphabet here, coming up after we get to Jared Blikre. So let's go ahead and do that.