Microsoft Stock Plummets After Q2 Earnings Report
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Should l Buy MSFT?
Source: Fool
- Earnings Performance Analysis: Microsoft's fiscal Q2 results revealed that despite Azure's revenue growing 39% year-over-year, the overall performance fell short of Wall Street expectations, leading to a 10% stock drop, reflecting market concerns about its growth potential.
- Strong Cloud Demand: Azure's remaining performance obligations increased by 11% to $625 billion, indicating a substantial backlog of contracts in artificial intelligence computing, showcasing future growth potential and sustained demand for its services.
- Market Valuation Shift: Following the stock decline, Microsoft's forward P/E ratio dropped to around 25 times, the lowest in three years, potentially offering an attractive buying opportunity for investors, especially given the company's historical strong performance.
- Investor Confidence: Despite short-term stock volatility, analysts remain optimistic about Microsoft's long-term outlook, advising investors to accumulate shares while the stock is still undervalued, anticipating a quick rebound in the future.
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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: 411.210
Low
500.00
Averages
631.36
High
678.00
Current: 411.210
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 Stock Plummets After Q2 Earnings Report
- Earnings Performance Analysis: Microsoft's fiscal Q2 results revealed that despite Azure's revenue growing 39% year-over-year, the overall performance fell short of Wall Street expectations, leading to a 10% stock drop, reflecting market concerns about its growth potential.
- Strong Cloud Demand: Azure's remaining performance obligations increased by 11% to $625 billion, indicating a substantial backlog of contracts in artificial intelligence computing, showcasing future growth potential and sustained demand for its services.
- Market Valuation Shift: Following the stock decline, Microsoft's forward P/E ratio dropped to around 25 times, the lowest in three years, potentially offering an attractive buying opportunity for investors, especially given the company's historical strong performance.
- Investor Confidence: Despite short-term stock volatility, analysts remain optimistic about Microsoft's long-term outlook, advising investors to accumulate shares while the stock is still undervalued, anticipating a quick rebound in the future.
See More
Microsoft Earnings Report: Strong Performance but Dim Outlook
- Strong Financial Performance: Microsoft's latest earnings report reveals revenue of $81.3 billion, a 17% year-over-year increase, exceeding expectations by nearly $1 billion, with an EPS of $4.14, up 24%, and net income soaring 60% to $38.5 billion, although slightly lower margins due to increased spending indicate a need for careful cost management.
- Critical Relationship with OpenAI: Microsoft has a backlog of $625 billion in future contracts, with $281 billion tied to OpenAI; if OpenAI fails to fulfill its obligations, Microsoft could face significant revenue losses, highlighting the importance of this partnership while current signs remain positive.
- Azure Growth Challenges: Azure's revenue grew 39% last quarter, but the company faces a challenge with demand outpacing available computing capacity, which may slow future growth; this situation, while manageable, could hinder Microsoft's ability to scale effectively in the cloud market.
- Increasing Capital Expenditures: Microsoft spent $37.5 billion on capital expenditures last quarter, primarily focused on building AI infrastructure, including data centers and processors, which is crucial for maintaining a competitive edge, though rapid technological advancements necessitate continuous investment in the latest hardware.
See More
Wall Street Focuses on Big Tech Capital Expenditures
- Capital Expenditure Forecasts: Alphabet has crossed the $400 billion annual revenue mark for the first time and projected AI-related capital expenditures of $175 billion to $185 billion for 2026, raising investor concerns but also boosting Nvidia and Broadcom shares in after-hours trading.
- Silver Price Volatility: Silver prices plummeted over 15% in just two days, derailing a rebound; however, the iShares Silver Trust (SLV) and SPDR Gold Shares (GLD) continue to see extremely bullish retail sentiment, indicating sustained investor interest in precious metals.
- Amazon Earnings Focus: Investors are keenly awaiting Amazon's (AMZN) earnings report, particularly for updates on AWS growth and AI efficiency, which are expected to significantly impact its stock price.
- Microsoft Downgrade: Stifel downgraded Microsoft (MSFT) to Hold with a price target cut from $540 to $392, primarily due to Azure supply issues and increasing competition from Google and Anthropic, reflecting a cautious market sentiment towards the software sector.
See More
Figma Employees' Wealth Vanishes as Lock-Up Period Ends
- Lock-Up Expiration: The 180-day lock-up period for Figma ended on January 27, allowing employees to sell shares, but the stock price had plummeted to $22.51, an 80.51% drop from its peak, significantly eroding employee wealth.
- IPO Performance Review: Figma's IPO in July 2025 saw shares surge 250% on the first day to $143.45, but the subsequent six months have seen a relentless decline, indicating a market reassessment of its valuation.
- Analyst Downgrade: Piper Sandler analyst cut Figma's price target from $70 to $35, citing “heavy selling pressure” in the software sector, which has heightened concerns about Figma's competitive position.
- Bleak Market Outlook: Despite reporting a 38% year-over-year revenue growth in its latest filing, the market's reassessment of SaaS valuations poses significant challenges for Figma, with insider selling expected to further pressure the stock price.
See More
Software Sector Turmoil Intensifies as Investors Seek Value
- Software Sector Selloff: The S&P 500 software and services index has plummeted 13% in the past week, erasing over $800 billion in market capitalization, reflecting investor anxiety over the potential disruption caused by artificial intelligence, leading to a sharp decline in confidence in software stocks.
- Technical Signals and Bottom Expectations: Despite the significant downturn, some portfolio managers have begun modest buying of beaten-down stocks, suggesting that these shares may be nearing a short-term bottom, indicating market expectations for a potential rebound in the sector.
- Market Rotation and Value Seeking: As investors shift from tech stocks to value and quality stocks, the selloff in software names is seen as a reaction to more attractive investment opportunities, particularly in sectors like consumer staples, energy, and industrials that have been less favored recently.
- AI Impact and Future Uncertainty: Concerns over emerging AI tools have exacerbated market volatility, and while some analysts believe software stocks may be starting to present value, there is still a need to wait for additional catalysts to confirm the sustainability of any rebound.
See More
S&P 500 Surpasses 7,000 for First Time
- Historic Milestone: The S&P 500 index crossed the 7,000 mark for the first time on January 28, 2026, representing a significant psychological threshold for the U.S. stock market; however, disappointing earnings from tech giants like Microsoft and SAP the following day cooled sentiment, raising investor concerns about the profitability of AI spending.
- Buffett Indicator Warning: At the end of Q3, the Buffett indicator reached 230%, 76.6% above its historical trend line, marking only the fourth occurrence in 60 years of approaching or exceeding two standard deviations, with similar extreme levels historically coinciding with major market drawdowns, prompting caution among investors.
- Market Volatility Risk: Although the Buffett indicator is not a guaranteed crash signal, its elevated level may suggest lower future returns and increased volatility, particularly as a few megacap companies dominate the S&P 500, exposing the index to sharp swings if any experience price declines.
- Investment Advice: Given the current market conditions, the analyst team identified 10 stocks that do not include the S&P 500 index, reflecting a cautious outlook on the index's future performance, suggesting investors consider other potential high-return investment opportunities.
See More
Microsoft Stock Plummets After Q2 Earnings Report
- Earnings Performance Analysis: Microsoft's fiscal Q2 results revealed that despite Azure's revenue growing 39% year-over-year, the overall performance fell short of Wall Street expectations, leading to a 10% stock drop, reflecting market concerns about its growth potential.
- Strong Cloud Demand: Azure's remaining performance obligations increased by 11% to $625 billion, indicating a substantial backlog of contracts in artificial intelligence computing, showcasing future growth potential and sustained demand for its services.
- Market Valuation Shift: Following the stock decline, Microsoft's forward P/E ratio dropped to around 25 times, the lowest in three years, potentially offering an attractive buying opportunity for investors, especially given the company's historical strong performance.
- Investor Confidence: Despite short-term stock volatility, analysts remain optimistic about Microsoft's long-term outlook, advising investors to accumulate shares while the stock is still undervalued, anticipating a quick rebound in the future.
See More
Microsoft Earnings Report: Strong Performance but Dim Outlook
- Strong Financial Performance: Microsoft's latest earnings report reveals revenue of $81.3 billion, a 17% year-over-year increase, exceeding expectations by nearly $1 billion, with an EPS of $4.14, up 24%, and net income soaring 60% to $38.5 billion, although slightly lower margins due to increased spending indicate a need for careful cost management.
- Critical Relationship with OpenAI: Microsoft has a backlog of $625 billion in future contracts, with $281 billion tied to OpenAI; if OpenAI fails to fulfill its obligations, Microsoft could face significant revenue losses, highlighting the importance of this partnership while current signs remain positive.
- Azure Growth Challenges: Azure's revenue grew 39% last quarter, but the company faces a challenge with demand outpacing available computing capacity, which may slow future growth; this situation, while manageable, could hinder Microsoft's ability to scale effectively in the cloud market.
- Increasing Capital Expenditures: Microsoft spent $37.5 billion on capital expenditures last quarter, primarily focused on building AI infrastructure, including data centers and processors, which is crucial for maintaining a competitive edge, though rapid technological advancements necessitate continuous investment in the latest hardware.
See More
Wall Street Focuses on Big Tech Capital Expenditures
- Capital Expenditure Forecasts: Alphabet has crossed the $400 billion annual revenue mark for the first time and projected AI-related capital expenditures of $175 billion to $185 billion for 2026, raising investor concerns but also boosting Nvidia and Broadcom shares in after-hours trading.
- Silver Price Volatility: Silver prices plummeted over 15% in just two days, derailing a rebound; however, the iShares Silver Trust (SLV) and SPDR Gold Shares (GLD) continue to see extremely bullish retail sentiment, indicating sustained investor interest in precious metals.
- Amazon Earnings Focus: Investors are keenly awaiting Amazon's (AMZN) earnings report, particularly for updates on AWS growth and AI efficiency, which are expected to significantly impact its stock price.
- Microsoft Downgrade: Stifel downgraded Microsoft (MSFT) to Hold with a price target cut from $540 to $392, primarily due to Azure supply issues and increasing competition from Google and Anthropic, reflecting a cautious market sentiment towards the software sector.
See More
Figma Employees' Wealth Vanishes as Lock-Up Period Ends
- Lock-Up Expiration: The 180-day lock-up period for Figma ended on January 27, allowing employees to sell shares, but the stock price had plummeted to $22.51, an 80.51% drop from its peak, significantly eroding employee wealth.
- IPO Performance Review: Figma's IPO in July 2025 saw shares surge 250% on the first day to $143.45, but the subsequent six months have seen a relentless decline, indicating a market reassessment of its valuation.
- Analyst Downgrade: Piper Sandler analyst cut Figma's price target from $70 to $35, citing “heavy selling pressure” in the software sector, which has heightened concerns about Figma's competitive position.
- Bleak Market Outlook: Despite reporting a 38% year-over-year revenue growth in its latest filing, the market's reassessment of SaaS valuations poses significant challenges for Figma, with insider selling expected to further pressure the stock price.
See More
Software Sector Turmoil Intensifies as Investors Seek Value
- Software Sector Selloff: The S&P 500 software and services index has plummeted 13% in the past week, erasing over $800 billion in market capitalization, reflecting investor anxiety over the potential disruption caused by artificial intelligence, leading to a sharp decline in confidence in software stocks.
- Technical Signals and Bottom Expectations: Despite the significant downturn, some portfolio managers have begun modest buying of beaten-down stocks, suggesting that these shares may be nearing a short-term bottom, indicating market expectations for a potential rebound in the sector.
- Market Rotation and Value Seeking: As investors shift from tech stocks to value and quality stocks, the selloff in software names is seen as a reaction to more attractive investment opportunities, particularly in sectors like consumer staples, energy, and industrials that have been less favored recently.
- AI Impact and Future Uncertainty: Concerns over emerging AI tools have exacerbated market volatility, and while some analysts believe software stocks may be starting to present value, there is still a need to wait for additional catalysts to confirm the sustainability of any rebound.
See More
S&P 500 Surpasses 7,000 for First Time
- Historic Milestone: The S&P 500 index crossed the 7,000 mark for the first time on January 28, 2026, representing a significant psychological threshold for the U.S. stock market; however, disappointing earnings from tech giants like Microsoft and SAP the following day cooled sentiment, raising investor concerns about the profitability of AI spending.
- Buffett Indicator Warning: At the end of Q3, the Buffett indicator reached 230%, 76.6% above its historical trend line, marking only the fourth occurrence in 60 years of approaching or exceeding two standard deviations, with similar extreme levels historically coinciding with major market drawdowns, prompting caution among investors.
- Market Volatility Risk: Although the Buffett indicator is not a guaranteed crash signal, its elevated level may suggest lower future returns and increased volatility, particularly as a few megacap companies dominate the S&P 500, exposing the index to sharp swings if any experience price declines.
- Investment Advice: Given the current market conditions, the analyst team identified 10 stocks that do not include the S&P 500 index, reflecting a cautious outlook on the index's future performance, suggesting investors consider other potential high-return investment opportunities.
See More
