Microsoft CEO Satya Nadella gestures as he speaks during the World Economic Forum meeting in Davos, Switzerland, on Jan. 20, 2026.
Microsoft shares slid about 10% on Thursday following an earnings report that disappointed some investors, prompting the stock's sharpest daily decline since March 2020.
The move trimmed the technology company's market cap by $357 billion, leaving it at $3.22 trillion by the end of Thursday trading.
The iShares Expanded Tech-Software Sector exchange-traded fund tumbled 5% on Thursday, while the technology-heavy Nasdaq Composite index finished the day down 0.7%. Not all of technology went down, though.
Meta shares spiked 10% after impressing analysts with robust results and quarterly revenue guidance on Wednesday.
Investors found a few imperfections in Microsoft's report.
The all-important growth statistic for Azure and other cloud services came in at 39%, below StreetAccount's 39.4% consensus. The company called for about $12.6 billion in fiscal third-quarter revenue from the More Personal Computing segment that includes Windows, lower than StreetAccount's $13.7 billion consensus, and the implied operating margin for the new quarter also came up short.
Microsoft's finance chief, Amy Hood, argued that the cloud result could have been higher if it had allocated more data center infrastructure to customers rather than prioritizing its in-house needs.
"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," she said.