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Microsoft reported better-than-expected earnings and revenue for the fiscal second quarter. The stock dropped in extended trading.

Here’s how the company did:

  • Earnings: $2.48 per share, adjusted, vs. $2.31 per share as expected by analysts, according to Refinitiv.
  • Revenue: $51.73 billion, vs. $50.88 billion as expected by analysts, according to Refinitiv.

Revenue increased by 20% year over year in the quarter, according to a statement, compared with almost 22% growth in the previous quarter.

Microsoft’s Intelligent Cloud segment, which contains the Azure public cloud, GitHub and server products such as Windows Server, generated $18.33 billion in revenue. That works out to 25.5% growth, and it’s a bit more than the $18.30 billion consensus among analysts surveyed by StreetAccount.

Revenue from Azure and other cloud services grew 46%. The expectation was 46%, according to a CNBC survey of 15 analysts, while analysts polled by StreetAccount had been looking for 45.3% Azure growth. Microsoft doesn’t disclose Azure revenue in dollars.

Revenue from the More Personal Computing segment, which includes Windows, advertising, devices and gaming, totaled $17.47 billion. That’s up 15.5% and above the StreetAccount consensus of $16.56 billion.

Microsoft said sales of Windows licenses increased by 25% in the fourth quarter. Technology industry research firm Gartner estimated that PC shipments had fallen 5%.

Xbox hardware revenue went up 4% with the passing of the one-year anniversary of Microsoft’s launch of the Xbox Series X and Series S consoles. In the previous quarter Xbox hardware revenue had spiked 166%. The gaming component of Microsoft has become more notable to investors this month after the company announced plans to acquire Call of Activision Blizzard, the publisher behind the “Call of Duty” and “Diablo” franchises, for $68.7 billion, the largest deal in Microsoft’s 46-year history.

The Productivity and Business Processes segment that includes Office, Dynamics and LinkedIn posted $15.94 billion in revenue, amounting to 19% growth. Analysts polled by StreetAccount had expected $15.86 billion.

As of the close on Tuesday, the stock is down 14% since the start of 2022, amid a broad selloff in technology stocks as investors brace for rising interest rates.

During the quarter, Microsoft released Windows 11 as the successor to Windows 10 and introduced the $249 Surface Laptop SE for school use that runs a special version of Windows 11. The company also announced the acquisition of Ally.io, whose software helps companies stay on top of key goals.

Guidance will be particularly important as investors look for indications of how supply chain constraints and inflation are factoring into future revenue and profit. Analysts polled by Refinitiv are expecting Microsoft to forecast $48.23 billion in revenue for the fiscal third quarter, implying 15.6% growth.

Executives will discuss the results and issue guidance on a webcast that will be broadcast over Microsoft’s Teams app starting at 5:30 p.m. ET.

This is breaking news. Please check back for updates.

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