For the fiscal second quarter, Microsoft reported higher earnings and revenue than expected. After the company issued a sales forecast that also exceeded expectations, the stock began to rise in extended trading.

The outlook assuaged fears about growth sparked by the December quarter's results, which initially dragged on Microsoft's stock in after-hours trading. Following the outlook, however, the stock reversed course, trading 3% higher than the previous day's close.

Microsoft's fiscal second-quarter earnings were nearly $19 billion, or $2.48 per share, up from $2.03 a year ago, and revenue was $51.73 billion, up from $43.08 billion. According to FactSet, analysts expected earnings of $2.32 per share on sales of $50.71 billion.

Microsoft said it expects to recognize 45 percent of its $152 billion in remaining performance obligations over the next year, the lowest percentage since at least 2017.

The tech giant expects Intelligent Cloud revenue to be between $18.75 billion and $19 billion in the third quarter of its fiscal year, thanks to "strong growth" in its Azure platform. Refinitiv data shows that this compares to a Wall Street consensus of $18.15 billion.

Microsoft's strong cloud computing momentum will almost certainly be reflected in rivals Inc and Alphabet Inc's Google's upcoming results. According to Brent Thill, a Jefferies analyst.

According to FactSet, Microsoft's Chief Financial Officer Amy Hood expects revenue of $48.5 billion to $49.3 billion in the fiscal third quarter, topping the average analyst expectation of $48.11 billion, and provided segment guidance that met or exceeded analysts' average expectations.

As of Tuesday's close, the stock had fallen 14% since the start of 2022, and is on track to have its worst month since 2010. As investors prepare for rising interest rates, the slump has coincided with a broad selloff in technology stocks.

Azure and other cloud services revenue increased by 46%, ending a four-quarter streak of growth of 50% or more. A CNBC poll of 15 analysts showed the expectation was 46%, while analysts polled by StreetAccount expected 45.3% Azure growth.

Microsoft has become one of the world's most valuable companies by focusing heavily on corporate software and services, particularly its cloud services and the web-based version of its Outlook email and calendar software, known as Office 365, which benefited from the shift to working and learning from home during the pandemic.

Meanwhile, investors are paying attention to Microsoft's proposed nearly $70 billion acquisition of Activision Blizzard Inc, which was announced on January 18 and represents a significant expansion of the company's gaming division.