Microsoft shares dropped about 5% after issuing weak current-quarter guidance after the bell Wednesday.
The software giant topped Wall Street’s fiscal second-quarter estimates, posting earnings of $3.23 per share on $69.63 billion in revenue. That surpassed the EPS of $3.11 and $68.78 billion forecast by analysts polled by LSEG.
The decline came as Microsoft finance chief Amy Hood said the company expects revenues for the current quarter to range between $67.7 billion and $68.7 billion, falling short of the $69.78 billion per LSEG. Revenue grew 12.3% year over year — the slowest growth since the middle of 2023.
Microsoft also posted a slowdown in growth in its Azure and other cloud services revenues. The segment was up 31%, down from 33% in the prior quarter.
Many Wall Street analysts stood by the technology behemoth despite the disappointing guide and Azure slowdown. Goldman Sachs analyst Kash Rangan called the company “well-positioned” to continue benefitting from artificial intelligence adoption and among the “most compelling investment opportunities” in the industry.
“Microsoft has proven they can drive a Cloud business, and now they have shown they can drive the largest AI business via a combination of high-quality Gen AI inferencing and Gen AI apps,” wrote Bernstein’s Mark Moerdler, adding that management needs to pivot toward the core Azure business independent of AI.
Microsoft shares dipped 2% during Monday’s session as part of a broader tech sector selloff. The drop came as Wall Street assessed the fallout from DeepSeek’s AI models. Estimates suggest the China startup trained its open-source model at a fraction of the costs for other competing U.S. products.
Microsoft CEO Satya Nadella said during the earnings call that DeepSeek’s R1 model is currently available through GitHub and the company’s Azure AI Foundry. It will also eventually be accessible on Copilot+ PCs, he said.
Other technology stocks saw strong gains during Thursday’s trading session on the back of earnings. Meta Platforms jumped nearly 4% on strong results, while Tesla edged up despite missing estimates and reporting a decline in automotive revenue. IBM popped 14% on robust results and notable gains in its software business as AI demand grows.