Microsoft Shares Fall on Weak Guidance and Cloud Revenue

Microsoft’s shares fell by 6.2% following the release of weak guidance for the current quarter. Despite surpassing Wall Street’s fiscal second-quarter estimates, the tech giant’s outlook fell short of expectations, causing shares to register their worst day since October 2022. As of now, Microsoft shares are down 1.5% since the start of 2025.

Microsoft reported earnings of $3.23 per share on $69.63 billion in revenue, beating analysts’ predictions of $3.11 per share and $68.78 billion in revenue. However, the positive results were overshadowed by the company’s guidance for the current quarter. Microsoft’s Chief Financial Officer, Amy Hood, announced expected revenues between $67.7 billion and $68.7 billion, below the $69.78 billion forecasted by LSEG.

The company’s cloud services, particularly Azure, showed signs of slowing growth. Azure and other cloud services revenues increased by 31%, down from 33% in the previous quarter. This slowdown contributed to investor concerns and the subsequent drop in stock price.

Despite the disappointing outlook and Azure slowdown, many Wall Street analysts maintain a positive view of Microsoft’s future. Goldman Sachs analyst Kash Rangan highlighted the company’s strong position to capitalize on artificial intelligence adoption. Bernstein’s Mark Moerdler emphasized Microsoft’s capability to drive both its cloud and AI businesses, suggesting a need to focus on the core Azure business independently of AI.

Microsoft’s stock also dipped 2% on Monday, influenced by a broader tech sector sell-off. Wall Street’s reaction to DeepSeek’s AI models played a role in the decline. Estimates indicate that the Chinese startup trained its open-source AI model at a fraction of the cost compared to competing U.S. products.

During the earnings call, Microsoft CEO Satya Nadella mentioned that DeepSeek’s R1 model is available through GitHub and Microsoft’s Azure AI Foundry. He added that it would eventually be accessible on Copilot+ PCs.

While Microsoft faced challenges, other tech stocks experienced gains. Meta Platforms surged nearly 4% on strong earnings, Tesla edged up despite missing estimates, and IBM soared 14% due to robust results and significant gains in its software business driven by growing AI demand.