Microsoft CEO Satya Nadella gestures while speaking at the World Economic Forum meeting in Davos, Switzerland, on January 20, 2026.
Fabrice Coffrini | AFP | Getty Images
microsoft Shares fell about 10% on Thursday following an earnings report that disappointed some investors, causing the company’s biggest single-day decline since March 2020.
The move slashed the company’s market capitalization by $357 billion, to $3.22 trillion as of Thursday’s close.
of iShares expands technology software division Exchange-traded funds (ETFs) fell 5% on Thursday, and the tech-heavy Nasdaq Composite Index ended the day down 0.7%. However, not all technology has declined.
Meta Shares soared 10% after impressing analysts with solid results and quarterly earnings guidance on Wednesday.
Investors found several imperfections in Microsoft’s report.
The most important growth statistic for Azure and other cloud services was 39%, below the StreetAccount consensus of 39.4%. The company estimated third-quarter fiscal revenue for its More Personal Computing division, which includes Windows, at about $12.6 billion, which was below the StreetAccount consensus of $13.7 billion and below the implied operating margin for the new quarter.
Amy Hood, Microsoft’s head of finance, argued that cloud outcomes could have been better if the company had allocated more data center infrastructure to customers instead of prioritizing internal needs.
“For GPUs, if we had allocated all the GPUs that just came online in Q1 and Q2 to Azure, our KPI would have been over 40,” she said.
Melius Research analyst Ben Reitz, who rates Microsoft stock a buy, said Thursday on CNBC’s “Squawk on the Street” that Microsoft should double down on data center construction.
“I think there are execution issues with Azure. We literally need to start building a little faster,” he said.
UBS analysts led by Karl Keirstead questioned Microsoft’s choice to reserve artificial intelligence computing power for products that have not been as successful as OpenAI’s ChatGPT, such as the Microsoft 365 Copilot productivity software add-on.
“M365 rotation growth is not accelerating due to Copilot, many checks on Copilot do not suggest a significant increase in usage (we will update our own checks in case we miss an increase in usage), and the model market appears to be crowded and capital intensive,” UBS analysts wrote. “Microsoft believes it needs to ‘prove’ these are good investments.”
The negative vibe was not universal across Wall Street. Bernstein analysts led by Mark Mädler gave Microsoft’s stock a buy rating and praised the company’s decision-making.
“We believe investors need to understand that management has made a conscious decision to focus on what’s best for the company over the long term, rather than driving the stock higher this quarter (as capacity constraints are likely to ease), or even last quarter and the coming quarters,” the analysts wrote in a note Thursday.
Hood insisted that capital spending will be slightly lower this quarter.
WATCH: ‘AI is cannibalizing software,’ says Melius’ Ben Reitz
