Microsoft Shares Slide Despite Strong Cloud Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1d ago
0mins
Source: NASDAQ.COM
- Strong Cloud Growth: Microsoft's Azure cloud unit reported a 39% revenue increase in Q2 FY2026, marking the tenth consecutive quarter of over 30% growth, driven by robust demand for computing power and AI services, which is expected to continue fueling future performance.
- Financial Performance Exceeds Expectations: The company's total revenue rose 17% year-over-year to $81.3 billion, with adjusted earnings per share (EPS) climbing 24% to $4.14, surpassing analyst expectations of $80.3 billion and $3.97, indicating solid performance across multiple business segments.
- Cautious Future Outlook: Despite strong performances from Azure and Copilot, Microsoft forecasts Q3 FY2026 revenue between $80.65 billion and $81.75 billion, slightly below analyst expectations, reflecting market concerns over its reliance on OpenAI.
- Increased Stock Attractiveness: Following the price dip, Microsoft's forward P/E ratio stands at 26 times based on FY2026 analyst estimates, indicating that the current stock price is attractive for investors seeking growth opportunities amidst ongoing strong performance.
Get Free Real-Time Notifications for Any Stock
Monitor tickers like MSFT with instant alerts to capture every critical market movement.
Sign up for free to build your custom watchlist and receive professional-grade stock notifications.
Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MSFT is 631.36 USD with a low forecast of 500.00 USD and a high forecast of 678.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 433.500
Low
500.00
Averages
631.36
High
678.00
Current: 433.500
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Microsoft's Cloud Growth Concerns Emerge Amid AI Strategy
- Cloud Revenue Growth: Microsoft's Azure and other cloud services saw a 39% revenue increase for the quarter ending December 31, slightly below Wall Street's expectations, highlighting a gap between market anticipation and actual performance in its cloud business.
- GPU Allocation Strategy: CFO Amy Hood noted that Azure's growth could have exceeded 40% if all available GPUs were allocated to cloud infrastructure, but Microsoft opted to use some advanced AI chips for its own applications, reflecting a focus on optimizing customer lifetime value.
- Reliance on OpenAI: Microsoft's remaining performance obligations ballooned to $625 billion by December 31, with 45% tied to OpenAI's expansion plans, raising investor concerns about the realization of future revenue, especially as OpenAI's losses are projected to reach $14 billion by 2026.
- Stock Price Decline: Following the release of its fiscal 2026 second-quarter earnings, Microsoft's shares fell over 7% in a week, indicating a lack of investor confidence in its AI-driven growth strategy, which could impact the company's future market performance.
Continue Reading
Alphabet and Amazon Earnings Week Sparks Market Focus
- Alphabet Earnings Preview: Alphabet is set to report earnings, with expectations that its self-driving service Waymo could be valued at $110 billion, showcasing the company's strong innovation capabilities and potentially boosting investor confidence.
- YouTube and Cloud Performance: YouTube has become the core of global video platforms, and combined with the rapid growth of Google Cloud, Alphabet's leadership in digital advertising and cloud computing is expected to further solidify, driving overall revenue growth.
- Market Competition Dynamics: With Amazon's earnings report approaching, the market is keenly watching the competitive relationship between Amazon and Alphabet, particularly in the cloud services sector, where AWS's growth rate is under scrutiny, potentially influencing investor sentiment towards both companies.
- Employment Data Impact: The employment data released on Friday will significantly affect the market's reaction to Amazon's earnings; a strong report could enhance confidence in Amazon, while a weak report may lead to stock price volatility, increasing investment risks.
Continue Reading