(Bloomberg) -- Microsoft Corp. posted second-quarter sales and profit gains, but reported decelerating revenue for Azure cloud-computing services, raising concern among some investors that the pace of growth in that division has peaked. Shares slipped in late trading.
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Revenue in the second quarter, which ended Dec. 31, climbed 20% to $51.7 billion, the Redmond, Washington-based software maker said Tuesday in a statement. Still, Azure sales growth of 46% fell short of the rosiest estimates of analysts and investors, who have come to expect gains of as much as 50% or more per quarter.
While Azure sales have been rising steadily, Microsoft faces steep competition for big contracts from Amazon.com Inc., the market leader, and Google, which ranks third in the market but is pouring resources into the business as it works to catch up.
“We’ve kind of hit the highest peak of growth we’re going to see in a while,” said Brent Thill, an analyst at Jefferies LLC. “You have a theme of decelerating growth and harder comps are coming up.”
Second-quarter revenue was predicted to be $50.9 billion on average, according to analysts polled by Bloomberg. Net income rose to $18.8 billion, or $2.48 a share, while analysts had predicted $2.32.
Sales of Office 365 to business customers rose 19%. Sales of Xbox machines climbed 4% compared with the year-earlier holiday period, when the new versions of the devices launched but supply was severely limited.
Microsoft shares dropped about 3.5% in extended trading following the report, after declining 2.7% to $288.49 at the close in New York. While the stock jumped 51% in 2021, it has declined 14% so far this year amid a rout in large technology stocks.
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