Microsoft Q2 - Stellar numbers

Microsoft gave investors exactly the kind of quarter they've been waiting for. Total revenue was up 13% to $70 billion and earnings were $3.46 a share, both beating expectations. This was the kind of performance that reassures long-term holders and tempts the sideline skeptics.

The cloud business, Azure, saw 35% revenue growth, with 16% points attributed to AI, clearly showing that Microsoft's early bet on OpenAI and its Copilot AI assistants are starting to pay off commercially.

More interestingly, despite the rapid pace of AI deployment, capital expenditure came in below expectations at $21.4 billion, marking the first quarterly decline in over two years. This suggests Microsoft is finding ways to scale smartly, even as demand for AI infrastructure continues to outpace supply.

There are also underappreciated tailwinds here. Tariff-related uncertainty, while not hitting Microsoft directly, could prompt more companies to lean into productivity software and AI tools as a hedge against margin compression. Satya Nadella's comment that "software is the most valuable resource to fight inflationary pressure" is more than just rhetoric; it positions Microsoft as an essential service in cost-conscious boardrooms.

This was a solid quarter that showed Microsoft executing on all fronts, including cloud, AI, and enterprise software, while managing costs and delivering upside. For us, it's a reminder that despite all the noise around tariffs, elections, and macro volatility, Microsoft still has levers to pull, and is pulling them with precision.