Microsoft’s market value dropped by $357 billion as its stock experienced the biggest decline since 2020.

Microsoft’s Stock Takes a Hit After Earnings Report

Microsoft’s shares dropped approximately 10% on Thursday, marking the steepest decline in a single day since March 2020. This decline followed an earnings report that didn’t sit well with many investors.

As a result, the company’s market value fell by $357 billion, bringing it down to $3.22 trillion by the close of trading on Thursday.

Meanwhile, exchange-traded funds focused on technology saw a 5% drop, while the Nasdaq Composite Index ended the day down 0.7%. However, not all sectors in technology experienced losses.

Meta, for instance, saw its shares jump 10% after delivering strong results and an optimistic quarterly earnings forecast on Wednesday.

In Microsoft’s earnings report, investors noticed various shortcomings. The most significant growth figure for Azure and other cloud services came in at 39%, just shy of the expected 39.4%. The company’s estimation for third-quarter revenue in its More Personal Computing division, which incorporates Windows, was around $12.6 billion—again below expectations of $13.7 billion and the anticipated operating margin for the upcoming quarter.

Amy Hood, Microsoft’s finance lead, suggested that cloud performance could have improved if more resources had been dedicated to customers instead of focusing on internal demands. “If we had distributed all the GPUs that became available in Q1 and Q2 to Azure, our KPI would have surpassed 40,” she noted.

Melius Research analyst Ben Reitz, who rates Microsoft stock as a buy, remarked on CNBC’s “Squawk on the Street” that the company should intensify its data center development. “I think there are execution issues with Azure. We literally need to start building a little faster,” he argued.

UBS analysts, led by Karl Keirstead, raised concerns about Microsoft’s choice to reserve AI computing resources for products that haven’t garnered as much success as OpenAI’s ChatGPT, such as the Microsoft 365 Copilot software add-on. They pointed out that the growth in M365 rotation isn’t accelerating due to Copilot, noting that many checks reveal no significant change in its usage.

On a more positive note, Bernstein analysts under Mark Mädler gave Microsoft’s stock a buy rating and appreciated the management’s strategic decisions. They remarked, “We believe investors need to understand that management is focusing on what’s best for the long term, instead of merely boosting the stock price this quarter or even the next.”