Microsoft makes $240 million a day.
Microsoft has the license to print money. Net, the company earned a hefty $22 billion in the second quarter. Yet, the stock is heading downwards.
Those wondering why the stocks of US tech giants have been skyrocketing in recent months can find a compelling answer at Microsoft: these companies are raking in a lot of money, are extremely profitable, and investors are betting that profits will continue to surge with applications for Artificial Intelligence (AI) in the future.
Microsoft generated around $65 billion in revenue in the second quarter, netting $22 billion. That means, in simple terms, the company earned around $240 million per day, $10 million per hour, and nearly $170,000 per minute from April to June.
For context, Mercedes generated around $40 billion in revenue last year and netted about $3.3 billion. That's $36 million per day, but still significantly less than Microsoft's cash machine.
Significant Stock Losses
However, Microsoft's quarterly results did not lead to a gain in stock prices, but rather significant losses. In after-hours US trading, shares fell by up to 7%. Market analysts attribute this to some investors taking profits after the long rally. Since the beginning of the year, the stock has risen by more than 15% due to the hype around AI. At the stock market, Microsoft is valued at $3.1 trillion, with only Apple being more valuable at $3.3 trillion.
Microsoft reported a 29% increase in revenue in its important cloud business for the past quarter. Market experts had expected around 30%, and the value was at 31% in the previous quarter. The stock market reacted sensitively to this otherwise minor difference because Microsoft is a pioneer in the business of cloud services and especially AI.
The company has struck a costly deal with OpenAI, the creator of ChatGPT, and is integrating its technology into all its products. Access to AI functions is sold on a subscription basis. Additionally, Microsoft is building expensive new data centers. Investors now want to see these billion-dollar AI investments pay off.
Despite Microsoft's impressive earnings of $22 billion in the second quarter, representing a significant revenue of $65 billion, the company's stock experienced a decline of up to 7% in after-hours US trading. This drop in stock price may be attributed to some investors cashing in on their profits after the prolonged rally, given that the stock has seen an increase of over 15% since the beginning of the year.
In the broader economic context, the performance of the [The economy] has a significant impact on the stocks of tech giants like Microsoft. While Microsoft's earnings suggest a robust [The economy], the stock market's reaction indicates that investors are cautious and seeking proof of return on their large investments in AI technologies and infrastructure.
