June 22, 2026 Microsoft is facing a proposed shareholder class-action lawsuit alleging the company misled investors about slowing growth in its Azure cloud business and the costs associated with expanding its artificial intelligence infrastructure. The lawsuit was filed after Microsoft’s shares plunged 10 per cent on Jan. 29, wiping out about US$357 billion in market value in the company’s largest one-day decline in nearly six years.
The proposed class action was filed Friday in federal court in Seattle by the City of St. Clair Shores Police and Fire Retirement System, a Michigan pension fund. The lawsuit accuses Microsoft of defrauding investors and artificially inflating its share price by failing to disclose weakening growth in Azure and the need to spend billions of dollars on AI-related infrastructure.
Microsoft said Monday that it believes the claims are without merit. “Microsoft stands by the integrity of its public statements and will vigorously defend itself in court,” the company said in a statement.
The lawsuit follows Microsoft’s quarterly earnings report released on Jan. 28. For its fiscal second quarter ended in December, the company reported 39 per cent revenue growth in Azure and other cloud businesses, matching analyst expectations but down from 40 per cent growth in the previous quarter.
Microsoft also forecast Azure growth of between 37 per cent and 38 per cent for the first three months of 2026.
The company reported capital expenditures of US$37.5 billion during the quarter, an increase of nearly 66 per cent from a year earlier and above analysts’ projections of US$34.3 billion.
According to the lawsuit, Microsoft attributed the slower Azure growth and increased spending to capacity constraints as it redirected resources toward artificial intelligence research and development and its Copilot AI assistant. Copilot competes with products such as Google’s Gemini and OpenAI’s ChatGPT. Microsoft is also a major investor in OpenAI.
The complaint names several Microsoft executives as defendants, including chief executive Satya Nadella and chief financial officer Amy Hood. The proposed class period covers investors who purchased Microsoft shares between May 1, 2025, and Jan. 28, 2026.
Shareholder lawsuits alleging securities fraud frequently follow sharp and unexpected declines in company stock prices.
