Microsoft Is Tanking. What's Behind the Decline?

The stock terms of Microsoft (NASDAQ: MSFT) cratered past week -- down 11% connected Thursday, the largest one-day driblet successful the tech giant's banal since March 2020. Shares rebounded a tiny spot successful the day to extremity 10% down connected the day. What's going on? And what should investors expect now?

Microsoft released results Thursday greeting for its fiscal 2nd quarter, ended Dec. 31, 2025. Based connected the header numbers, you would person expected a large absorption from Wall Street. Revenue of $81.3 cardinal successful the 4th was up 17% from a twelvemonth ago. Diluted net per stock accrued 60% to $5.16. Operating income grew 21% to $38.3 billion. Both income and net figures exceeded statement expert expectations.

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But investors looked past those numbers and focused narrowly connected the company's spending and unreality income growth. Capital expenditures roseate 66% from a twelvemonth earlier, to a monolithic $37.5 billion, higher than expert estimates of $36.2 billion. Meanwhile, gross from the company's Azure unreality computing unit, which reflects artificial quality (AI) demand, grew 38%.

That unreality gross fig sounds impressive, but it hardly met expert expectations. Worse for the banal price, the maturation complaint of unreality gross slowed from the erstwhile quarter. And the outlook for income maturation successful the existent 4th is 37% to 38%, with Wall Street wanting adjacent higher growth.

Taken together, the maturation successful superior expenditures and the gross from unreality computing painted a disappointing representation for investors. They expected a bigger payoff for each that investment. Thus, the plunge successful the stock price.

It's beauteous wide that capitalist expectations surrounding AI investments are sky-high close now, arsenic evidenced by the monolithic rallies successful shares of the "Magnificent Seven" tech stocks implicit the past respective years.

These companies are pumping billions of dollars into AI information centers, probe and development, and related infrastructure. And Wall Street, ever a spot impatient, wants to spot a payoff, successful presumption of gross and profits, from that roar successful superior expenditures sooner alternatively than later.

Also, the contention among the Magnificent Seven companies is fierce. That's wherefore shares of Meta Platforms (NASDAQ: META) surged connected Thursday, up much than 10% connected the day. Meta besides reported results connected Thursday, but dissimilar Microsoft, the institution raised its guidance connected income successful the existent quarter, to a scope of $53.5 cardinal to $56.5 billion, which is higher than the $51.4 cardinal statement estimate.