Microsoft Shares Drop as Cloud Outlook and AI Spending Disappoint

Photo : Reuters

Microsoft stock dropped by 4.5% after it said its cloud business would not grow as expected. Investors were worried about how much money Microsoft is spending and how it’s not making enough money from new technology. Microsoft is also facing competition from Chinese companies that are offering cheaper AI models, making investors even more concerned.

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Microsoft’s cloud service, Azure, did not do as well as Wall Street hoped. Even though the company made more money than expected, it is still spending a lot on new technology, and investors want to see more money coming in from that. Microsoft has been spending billions of dollars to build AI data centers, but they haven't yet made enough profit from this spending.

For a while, Microsoft and other big tech companies have been investing a lot in AI. But investors haven’t seen the return they expected. Some experts said it’s okay if the money doesn’t come back right away, but they want to see a clear plan showing how Microsoft plans to make money from its big investments.

Microsoft’s CEO, Satya Nadella, said the company is working hard to reduce the cost of AI. He believes that as AI becomes better and cheaper, more people will want to use it.

However, there are fears that Microsoft could be in trouble because of DeepSeek, a Chinese company that is offering AI at a lower price. Microsoft has already added DeepSeek’s AI to its own cloud service, Azure, to stay competitive.

Despite this, Microsoft is staying positive. Its CFO, Amy Hood, said that Azure will grow by 31% to 32% in the next quarter, though this is slightly lower than what Wall Street was expecting.

Microsoft also spent more money than expected, with $22.6 billion in capital expenditures. Some of this was for building more data centers to run AI programs.

Microsoft’s stock price has gone up by about 8% this year. But other tech companies like Google (Alphabet) and Amazon have seen bigger gains. Even though Microsoft’s stock isn’t doing as well, the company is still seen as a leader in cloud services and AI.

Microsoft made $69.6 billion in total revenue during the second quarter of the fiscal year, which is a 12% increase from last year. It also earned $3.23 per share, which is more than what analysts had expected.