Why Microsoft stock is sinking today

Microsoft just beat quarterly earnings estimates. So why is the stock falling?

| More on:
Rede arrow on a stock market chart going down.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Microsoft (NASDAQ: MSFT) stock is slipping in Thursday's trading following the company's recent quarterly report. The tech giant's share price was down 5.4% as of 3 p.m. ET.

After the market closed yesterday, Microsoft reported results for the first quarter of its current fiscal year -- which ended Sept. 30. While sales and earnings for the period came in ahead of Wall Street's expectations, investors aren't satisfied with the company's forward guidance.

Microsoft posts strong growth in fiscal Q1

Microsoft posted earnings per share of $3.30 on revenue of $65.59 billion, beating the average analyst estimate's call for per-share earnings of $3.11 on revenue of $64.56 billion. The company's revenue was up roughly 16% year over year in the period, and earnings per share were up 10% compared to last year's quarter. The business posted operating income of $30.6 billion in the period -- good for a margin of roughly 46.7% and up 14% compared to Q1 last year.

Microsoft's Intelligent Cloud business was once again the standout growth driver. Segment sales increased 20% year over year to reach $24.1 billion. Within the segment, sales for the Azure cloud infrastructure business rose 34%.

Meanwhile, sales for the productivity and business processes segment came in at $28.3 billion, up 12% year over year. Revenue for the personal computing segment rose 17% year over year to reach $13.2 billion. Overall, it was a very strong quarter for the company, but management's forward guidance doesn't appear to have lived up to Wall Street's lofty expectations.

But Wall Street wasn't satisfied with Microsoft's cloud and AI guidance

For the current quarter, Microsoft expects growth for the Azure business to come in between 31% and 32% -- decelerating from the 34% growth rate it posted last quarter. Overall revenue for the Intelligent Cloud segment is expected to be up between 18% and 20% year over year.

The company expects artificial intelligence (AI) sales to be roughly in line with performance last quarter, and it looks like investors were hoping for meaningful sequential growth. Along with rising spending on AI infrastructure, the guidance shortfall is causing Microsoft stock to lose ground today. On the other hand, management said that it expects Azure's growth to accelerate in the second half of the fiscal year. For long-term investors looking to build exposure to AI trends, today's pullback could present a worthwhile buying opportunity.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Nvidia share price slips despite 94% revenue growth

Q3 earnings beat expectations, but what about guidance?

Read more »

high, climbing, record high
International Stock News

Could the S&P 500 Index hit 6,500 by the end of 2025?

Could the index climb higher?

Read more »

a small child holds his chin with his head on the side in a serious thinking pose against a background of graphic question marks and a yellow lightbulb.
International Stock News

Is it too late to buy Nvidia shares?

Is Nvidia stock a buy ahead of its third-quarter earnings report tomorrow?

Read more »

a group of people stand examining a large glowing cystral ball held in the hands of one of the group members while the others regard it with various expressions of wonder, curiousity and scepticism.
International Stock News

Here's what to expect from Nvidia on November 20

Can Nvidia score another win?

Read more »

Two people lazing in deck chairs on a beautiful sandy beach through their hands up in the air.
International Stock News

2 no-brainer Warren Buffett stocks to buy right now

While replicating Buffett's success isn't possible, there are a handful of his investments that are no-brainer buys.

Read more »

A man with a beard and wearing dark sunglasses and a beanie head covering raises a fist in happy celebration as he sits at is computer in a home environment.
International Stock News

3 reasons to buy Nvidia stock before November 20

This week marks a big moment for tech investors as perhaps the most anticipated earnings of the year will be…

Read more »

A woman smiles over her shoulder as she sits in the driver's seat of a car with keys in hand.
International Stock News

Why Tesla stock just popped

Tesla stock raced ahead Monday after Bloomberg reported the incoming Trump administration's intentions around self-driving vehicles.

Read more »

A woman holds her hand out under a graphic hologram image of a human brain with brightly lit segments and section points.
International Stock News

Prediction: Nvidia stock is going to soar after November 20

Nvidia is scheduled to report third-quarter earnings on Wednesday.

Read more »