Microsoft Stock Slumps, Weighing on Big Tech Shares, on Disappointing Forecast

Microsoft (MSFT) shares fell Thursday after the company’s revenue forecasts fell short of Wall Street estimates and The cloud computing giant is struggling to meet demand.

Shares were down nearly 6% Thursday morning, weighing on shares of some of its Big Tech peers. The recession cut the stock’s year-to-date gains — which had been running at 24% — to just 8%.

Microsoft on Wednesday expected revenue for its intelligent cloud division to grow 18% to 20% in the current quarter, below analyst estimates. Growth for Azure, the cloud computing platform, is expected to be about 31% or 32%, a deceleration from last quarter and a little slower than Wall Street expected. The company’s first-quarter financial results, which largely exceeded expectations, were overshadowed by disappointing expectations.

Microsoft is struggling to meet growing demand for artificial intelligence, a difficulty executives expect to continue in the current quarter. CFO Amy Hood expressed on the company’s earnings call that growth will rebound in the first half of next year as more cloud computing capacity comes online.

What do analysts think about Microsoft’s profits?

Analysts on Thursday were optimistic about the outlook. They pointed to executives’ comments indicating that demand for AI services remains strong, and that increasing the company’s spending on AI infrastructure would help it meet this demand in the future.

“While Azure’s Q2 outlook is disappointing, fundamental trends such as large deal volume underscore that demand is not the issue,” Bank of America analysts wrote in a note to clients on Thursday. They maintained a “buy” rating on the stock and a price target of $510.

Jefferies analysts also reiterated their “buy” rating and $550 price target. “We are confident in MSFT as a winner in the AI ​​space,” the analysts wrote.

Microsoft weighs in on big tech stocks

Microsoft’s results weighed on technology stocks on Thursday. Amazon ( AMZN ) stock was down more than 2% Thursday morning, while AI chip giant Nvidia ( NVDA ) was down nearly 4%. Oracle (ORCL), another AI-focused cloud computing provider, fell about 3%.

Shares of Meta (META) fell more than 2% after the company raised its minimum full-year capital expenditures (CapEx) forecast while increasing spending on artificial intelligence. Concerns about excessive spending on AI infrastructure weighed on big tech stocks during the latest round of earnings reports in July.

CapEx’s rise will likely remain the focus of Wall Street’s attention when Amazon reports its results after the closing bell on Thursday.