Microsoft Faces Azure Growth Challenges Despite Strong AI Demand

The tech giant's cloud business growth slowed due to execution issues and data center constraints, prompting analysts to lower price targets.

Microsoft's fiscal Q2 results showed 31% year-over-year growth for Azure, falling short of analysts' expectations and at the lower end of the company's guidance.
The company attributed Azure's slower growth to execution issues in non-AI segments and limited data center capacity, which it expects to resolve by the fiscal year's end.
Despite the challenges, Microsoft reported strong demand for AI services, with Azure AI Foundry reaching over 200,000 monthly users and AI-related bookings rising significantly.
Microsoft's commercial cloud revenue surpassed $40 billion for the first time, growing 21% year-over-year, but missed Wall Street's estimates of $41.1 billion.
Analysts lowered their price targets for Microsoft, citing concerns over Azure's growth trajectory, but maintained generally positive ratings due to AI and cloud demand potential.