Key Points
- Microsoft stock dropped 10%, its sharpest decline since March 2020. The company lost $357 billion in market value in a single day.
- Azure cloud growth missed analyst expectations due to capacity shortages.
- Analysts questioned whether AI tools like Copilot are generating enough revenue.
- Meta stock surged 10% on the same day, contrasting with Microsoft’s losses.
Microsoft stock took a nosedive on Thursday, falling about 10% in its worst single-day performance since the pandemic crash of March 2020. The massive sell-off wiped out $357 billion in market value, dragging the tech giant’s total worth down to $3.22 trillion. While the company is still growing, investors were disappointed that key numbers didn’t hit the high targets Wall Street had set.
The main issue was Azure, Microsoft’s cloud computing platform. Growth for Azure came in at 39%, which is impressive on its own but just missed the 39.4% figure analysts were looking for. The company also gave a weaker-than-expected revenue forecast for its Windows division, adding to the gloom.
Amy Hood, Microsoft’s finance chief, defended the numbers. She explained that Azure growth could have been higher, but the company simply didn’t have enough data center infrastructure to meet customer demand. Instead of renting out all its new powerful chips to clients, Microsoft kept many of them for its own internal AI needs. Essentially, they had more customers than they had capacity to serve.
Wall Street’s reaction was mixed. Some analysts criticized the company’s execution. Ben Reitzes of Melius Research said Microsoft needs to “literally stand up buildings a little faster.” Others, like the team at UBS, questioned whether the massive spending on AI products like “Copilot” is actually paying off, noting that it hasn’t seen the same explosive success as ChatGPT.
However, not everyone is panicking. Analysts at Bernstein argued that Microsoft is making the smart play by focusing on long-term health over short-term stock gains. They believe the current capacity shortages will eventually ease.
The tech sector was a tale of two cities on Thursday. While Microsoft struggled, Meta shares soared 10% after the social media giant impressed investors with strong revenue and a solid outlook. For Microsoft, the pressure is now on to prove that its billions of dollars in AI investments will turn into real profits sooner rather than later.
