Microsoft shares dropped approximately 10 percent on Thursday after an earnings report that disappointed certain investors, resulting in the sharpest daily decline in the stock since March 2020. The action reduced the market value of the technology firm by $357 billion to make it worth $3.22 trillion at the end of the trading day on Thursday.
The iShares Expanded Tech-Software Sector exchange-traded fund has slipped 5 percent on Thursday, and the technology-heavy Nasdaq Composite index has ended the day slumping 0.7 percent. Not all of technology went down, though.
Meta stock surged 10 percent following an impressive analyst report with strong performance and quarterly revenue outlooks on Wednesday. Investors also discovered that there were some flaws in Microsoft’s report.
The crucial growth figure of the Azure and any other cloud services was recorded at 39 percent, still lower than the consensus of 39.4 percent, facilitated by StreetAccount.
The company has estimated approximately $12.6 billion in fiscal third-quarter revenues under the More Personal Computing area, which encompasses windows which was lower than the $13.7 billion consensus figure published by StreetAccount, and the forecasted operating margin during the new quarter also failed.
The finance chief at Microsoft, Amy Hood, claimed that Microsoft could have achieved better results with cloud outcome in case Microsoft had invested more in data center infrastructure for its customers instead of focusing on its in-house needs.
He said, “If I had taken the GPUs that just came online in Q1 and Q2 in terms of GPUs and allocated them all to Azure, the KPI would have been over 40.”
Analyst Ben Reitzes of Melius Research, with a buy rating on Microsoft stock, stated during CNBC’s “Squawk on the Street” on Thursday that Microsoft might double down on data center construction.
He stated, “I think that there’s an execution issue here with Azure, where they need to literally stand up buildings a little faster.”
Analysts at UBS, led by Karl Keirstead, have expressed doubts about Microsoft investing in artificial intelligence computing capacity to support products like the Microsoft 365 Copilot productivity software add-on that have not been as successful as OpenAI ChatGPT.
The UBS analysts wrote, “M365 revs growth is not accelerating due to Copilot, many checks on Copilot don’t suggest a strong usage ramp (we plan to refresh our own checks in case we’ve missed a usage ramp), and the model market appears crowded and capital-intensive. We think Microsoft needs to ‘prove’ that these are good investments.”
However, the Bernstein analysts, headed by Mark Moerdler, holding the equivalent of a buy rating on Microsoft shares, praised the decision-making that Microsoft made.
The analysts wrote in a Thursday note, “Investors need, we believe, to understand that management made a cognizant decision to focus on what is best for the company long term rather than driving the stock up this quarter or even over last quarter and a few quarters to come (as capacity constraints likely abate).”
Thus, Hood expected expenditures on capital to be reduced somewhat during the present quarter.
