With Shares Down 10% After Its Earnings Call, Is Microsoft a Buy?

You cognize that expectations for a institution are entity precocious erstwhile it tin study a 60% year-over-year leap successful profits, a 17% emergence successful revenue, a 45% summation successful users of its flagship product, and $12.7 cardinal returned to shareholders that 4th ... and the banal inactive tanks by 10% the adjacent day. Microsoft (NASDAQ: MSFT) was the unfortunate of this expectations deed past Thursday, arsenic Wall Street digested its Q2 2026 net study released the time before. The sell-off wiped distant a staggering $357 cardinal from the tech giant's marketplace capitalization.

Analysts pointed to slower-than-expected maturation successful its unreality computing segment, arsenic good arsenic concerns implicit its plans to ramp up spending connected information centers. Are analysts close to beryllium rattled? Or are they overreacting arsenic the institution pivots successful ways they don't afloat grasp?

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Here's what the numbers say.

Microsoft Cloud gross came successful astatine $51.5 cardinal for the quarter, a 26% emergence twelvemonth implicit year. This matched the 26% maturation successful the conception the 4th prior, but analysts took a dim presumption of maturation failing to accelerate.

Microsoft's $37.5 cardinal successful spending connected artificial quality (AI) information centers besides drew consternation. This 65% leap successful AI infrastructure concern from a twelvemonth agone is investigating investors' patience successful the company's AI vision, adjacent arsenic CEO Satya Nadella says the AI gyration is inactive successful its "early innings."

Perhaps alert that Wall Street would beryllium leery, CFO Amy Hood explained connected the net league telephone that Microsoft's unreality concern volition beryllium capable to turn adjacent faster erstwhile the institution gets past its shortage of AI hardware. Nonetheless, astatine slightest 4 analysts lowered their terms targets connected Microsoft.

But for each the hand-wringing implicit rising superior expenditures, it's notable that operating expenses, oregon what a institution pays for day-to-day concern functions (paying employees, probe and development, keeping the lights on, etc.), grew by conscionable 5% twelvemonth implicit year. That's acold little than the 19% maturation successful operating income and 15% maturation successful gross that the institution reported, portion its gross borderline maturation of 14% shows Microsoft is becoming much businesslike successful producing and managing nonstop costs.

Microsoft received $7.6 cardinal past 4th from its concern with OpenAI, the pioneering institution down ChatGPT. OpenAI committed to buying $250 cardinal worthy of Microsoft Azure compute services to assistance bid its AI models.