February 2, 2026 Microsoft shares fell about 10 per cent on Jan. 29 after the company reported quarterly results that missed some investor expectations. The drop in shares erased roughly $357 billion from Microsoft’s market capitalization, leaving it at about $3.22 trillion by the close of trading.
This marked the stock’s sharpest single-day decline since March 2020.
Investors focused on several areas of weakness in Microsoft’s earnings report. Growth in Azure and other cloud services came in at 39 per cent, slightly below the 39.4 per cent consensus estimate compiled by StreetAccount. Microsoft also forecast about $12.6 billion in fiscal third-quarter revenue for its More Personal Computing segment, which includes Windows, below the $13.7 billion analysts had expected. The implied operating margin for the upcoming quarter also fell short of estimates.
Microsoft Chief Financial Officer Amy Hood said cloud growth could have been higher if the company had directed more newly available infrastructure to external customers instead of prioritizing internal demand.
“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,” Hood said.
Some analysts said the results highlight execution challenges tied to capacity constraints. Ben Reitzes of Melius Research, who has a buy rating on Microsoft shares, said on CNBC’s “Squawk on the Street” that the company should accelerate data center construction.
“I think that there’s an execution issue here with Azure, where they need to literally stand up buildings a little faster,” he said.
Analysts at UBS, led by Karl Keirstead, questioned Microsoft’s decision to allocate significant AI computing capacity to products such as Microsoft 365 Copilot, which they said has not yet shown the same level of traction as OpenAI’s ChatGPT.
“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,” the UBS analysts wrote.
Other analysts took a more supportive view. Analysts at Bernstein, led by Mark Moerdler, said Microsoft’s management was prioritizing long-term positioning over near-term stock performance.
“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),” the analysts wrote in a note Thursday.
Hood said Microsoft expects capital expenditures to decline slightly in the current quarter, suggesting some easing in the pace of spending following heavy investment in data center and AI infrastructure.
