Let’s take a look at the earnings calls for two of the big tech players, Apple and Microsoft, who have both released their numbers.
Apple’s shares experienced a notable surge in after-market trading, despite the company reporting a decline in iPhone sales and a significant drop in revenue from its China market. For the last quarter, Apple earned over sixty-nine billion dollars from iPhone sales, missing analysts’ expectations of seventy-one billion dollars.. Apple’s iPhones constituted approximately fifty-five percent of its total revenue. In contrast, overall revenue for the quarter rose four percent to one hundred twenty-four billion dollars, surpassing estimates. Apple’s net profit also increased to over thirty-six billion dollars, with earnings per share rising to two dollars and forty cents. The company’s services division grew by nearly fourteen percent, generating almost twenty-six billion dollars in revenue. Apple has reported a record gross margin of 46.9 percent in its fiscal first-quarter earnings, surpassing the previous high of 46.6 percent from March 2024.
Microsoft’s stock plunged over 6% after issuing a weaker-than-expected revenue forecast, despite beating Wall Street estimates with $69.63 billion in revenue and $3.23 per share in earnings. Growth slowed to 12.3% year-over-year, the weakest since mid-2023, with concerns centered on its cloud and AI business. Azure revenue rose 31%, just below the 31.8% forecast, triggering a 4.5% drop in after-hours trading. Capital expenditures hit $22.6 billion, exceeding projections and raising investor concerns over AI monetization. CEO Satya Nadella reassured that costs are declining and performance is improving, but questions linger on returns.
Azure growth, while still strong at thirty-one percent, is showing signs of slowing, with Microsoft projecting flat growth for the third quarter. Notably, thirteen percentage points of Azure’s growth were attributed to artificial intelligence services, marking a one hundred fifty-seven percent increase from the previous year.
Microsoft’s AI revenue is soaring, surpassing $13 billion annually with 175% year-over-year growth. However, competition is intensifying—Chinese AI model DeepSeek is reportedly delivering similar performance at lower training costs. Doubts about the adoption of Microsoft 365 Copilot are rising, with a recent Gartner survey indicating lukewarm demand beyond pilot projects.
Apple’s results show a clear trend—hardware, particularly the iPhone, is becoming a less reliable growth engine, while services are stepping up. Apple’s record 46.9% gross margin highlights a fundamental advantage—its ability to charge premium prices while maintaining cost efficiency. However, this is largely fueled by services rather than hardware.
Microsoft’s earnings reinforce the AI paradox—massive investment, strong revenue growth, but unclear monetization. The market’s reaction to Microsoft’s numbers (a 6% stock drop) signals skepticism about AI’s near-term financial return, despite 175% growth in AI revenue.
For IT services providers, the biggest takeaway is AI-driven cloud growth isn’t guaranteed—clients are being selective. The real opportunities lie in helping enterprises optimize AI investments rather than just selling hype.