Microsoft Shares Steady After 10% Drop Following Earnings Report

Shares of Microsoft were little changed on Friday, a day after the stock suffered its largest single-day decline since 2020, falling 10% following the company’s latest earnings report.

Thursday’s sell-off erased approximately $357 billion from Microsoft’s market value, despite the software giant reporting quarterly revenue that exceeded analyst expectations.

The sharp decline contrasted with the performance of other major technology companies. Meta, which reported significant spending on artificial intelligence infrastructure on the same day, saw its shares rise by about 8%.

Cloud growth concerns

Investors focused on the performance of Microsoft’s cloud computing business, particularly Azure. Revenue from Azure and other cloud services grew 39%, slightly below StreetAccount’s consensus forecast of 39.4% and down from 40% growth in the previous quarter.

Chief Financial Officer Amy Hood said cloud revenue growth could have been higher if the company had directed more data-centre capacity to customers rather than prioritising internal demand, including artificial intelligence workloads.

Microsoft also issued a softer-than-expected outlook for operating margins in the current quarter. The company forecast about $12.6 billion in revenue from its More Personal Computing segment, which includes Windows, compared with analysts’ expectations of $13.7 billion.

Analyst reaction

Analysts said the market reaction reflected a narrow focus on Azure’s growth rate as a measure of Microsoft’s overall health.

Barclays analyst Raimo Lenschow said investors appeared concerned that Azure growth may not accelerate further due to the size of the business and Microsoft’s use of capacity for its own higher-margin AI products, including Copilot and internal research efforts.

Bernstein analyst Mark Moerdler said management had chosen to prioritise long-term strategy over short-term stock performance, adding that capacity constraints could ease in coming quarters.

Despite the sharp decline, some analysts remained positive on the stock. Wells Fargo reiterated an overweight rating on Microsoft, citing the company’s early lead in artificial intelligence and its strong position in enterprise software.