Microsoft (MSFT) reported its fiscal third quarter earnings on Tuesday, beating Wall Street’s expectations, despite a continued slowdown in the company’s cloud revenue.

The tech giant reported Azure and other cloud services revenue growth of 27% year-over-year for the quarter. That number has declined every quarter since at least Q3 2022, as companies trim their capital expenses amid rising interest rates.

Here are the most important numbers from the report compared to what analysts were expecting, as compiled by Bloomberg.

  • Revenue: $52.9 billion vs. $51.1 billion expected

  • Adj. EPS: $2.45 vs. $2.23 expected

  • Productivity and Business processes: $17.5 billion vs. $17.1 billion expected

  • Intelligent Cloud: $22.1 billion vs. $21.9 billion expected

  • More Personal Computing: $13.3 billion vs. $12.3 billion expected

Shares of Microsoft were up more than 4% following the announcement.

“The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing,” Microsoft CEO Satya Nadella said in a statement.

“Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”

Microsoft helped kick off Big Tech’s AI obsession with its multi-year, multi-billion dollar investment in ChatGPT developer OpenAI.

The Windows maker has since implemented versions of OpenAI’s technology in its Edge browser, Bing search engine, Microsoft 365 productivity software, and cybersecurity offerings.

Microsoft CEO Satya Nadella listens to a question at the annual Microsoft shareholders meeting Wednesday, Nov. 30, 2016, in Bellevue, Wash. (AP Photo/Elaine Thompson)

Microsoft CEO Satya Nadella listens to a question at the annual Microsoft shareholders meeting Wednesday, Nov. 30, 2016, in Bellevue, Wash. (AP Photo/Elaine Thompson)

That’s given Microsoft a perceived leadership position in the AI wars, leaving rival Alphabet’s Google (GOOG, GOOGL) playing catch up. Amazon (AMZN), meanwhile, is working to bring generative AI to its services, while Facebook parent Meta (META) is cobbling together teams to kick start its own efforts.

And while Microsoft’s stock has seemingly benefited from both the AI hype and overall market rebound after a rough 2022, the company’s main growth driver continues to be its cloud computing efforts in its Azure unit.

But that growth has slowed markedly over the last year. In Q3 2022, Microsoft reported Azure growth of 46% year-over-year. But that’s since fallen each quarter, landing at 27% in Q3 2023.

Part of the reason for this decline was large customers pulling back on spending as higher interest rates challenged global growth. Microsoft is also contending with flagging PC sales, as demand from consumers and business customers falls from pandemic-era highs.

The company reported a 9% decline in its More Personal Computing segment revenue, with Windows OEM revenue down 28%. Microsoft sells Windows and other software licenses to third-party PC partners.

By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley

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