After Microsoft (MSFT) reported fiscal first-quarter earnings that topped analysts' estimates, CFO Amy Hood told investors on the company’s earnings call that demand for artificial intelligence (AI) “continues to be higher than our available capacity.”

Microsoft's Intelligent Cloud segment, which includes the Azure cloud computing platform, led growth in the quarter. Revenue from the segment jumped 20% year-over-year to $24.09 billion as demand for AI surged, though analysts had expected more.

The Fastest-Growing Business in Microsoft's History

CEO Satya Nadella said usage of Azure’s Open AI service more than doubled over the past six months, with Microsoft’s AI business on track to reach an annual revenue run rate of $10 billion in the second quarter, which would make it “the fastest business in our history to reach this milestone.”

“We are seeing AI drive a fundamental change in the business applications market as customers shift from legacy apps to AI first business processes,” Nadella said.

Cloud Growth Could Slow Before Picking Up in the Second Half of 2025

Hood said Microsoft expects Intelligent Cloud growth could slow to between 18% and 20% in the second quarter, with Azure’s growth expected to decelerate to between 31% and 32%, before speeding up again in the back half of the fiscal year.

Shares of Microsoft slid about 3% in extended trading following the earnings call. They were up 15% for 2024 through Wednesday’s close.