Microsoft Corp. sparked a relief rally for the cloud Tuesday, then rained on that parade after less than two hours of joy.
Microsoft MSFT reported slightly disappointing holiday-quarter results, but the Azure cloud-computing business topped Wall Street’s expectations and initially sent shares higher in after-hours trading. Other cloud businesses — including the only rival believed to have a bigger market share than Microsoft, Amazon.com Inc. AMZN — joined in the fun with after-hours gains.
“Basically, Microsoft admitted that the cloud slowdown we’d all feared has finally arrived,” said Maribel Lopez, principal analyst at Lopez Research. Investors have already seen signs of a slowdown in the cloud business for the past couple quarters from both Microsoft and Amazon, as well as at cloud-software companies like Salesforce.com Inc. CRM , which is now under attack by activist investors. But now investors want to know if the cloud will ever return to those higher rates of growth, or if they need to prepare for slower growth going forward indefinitely.
“I don’t think we’re going to take two years to optimize. But we’re going to take this year to optimize,” Nadella said. “And then as we optimize, the new projects start. The new project starts don’t start instantly at their peak usage.”
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