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Microsoft's stock isn't recovering in Friday's pre-market trading, after the stock saw its biggest daily decline since 2020 on Thursday, sliding 10% after an earnings report. It's trading 0.55% up on Thursday's close as of 6.44 am ET. This is despite the company's second-quarter earnings beating analyst revenue expectations. Like other hyperscalers, Microsoft has invested huge sums in its AI infrastructure buildout. But Meta reported huge AI spending on the same day and its stock jumped 8%.
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Why did Microsoft's stock drop?
Investors latched onto the growth of Microsoft's cloud computing platform Azure and other cloud services, which came in at 39% below StreetAccount's 39.4% consensus. Those areas saw 40% growth in the fiscal first quarter. The company's CFO Amy Hood said that the cloud business' results could have been higher if the company had allocated more data center infrastructure to customers rather than prioritising in-house needs. Implied operating margin for third-quarter also came up short, with Microsoft calling for about $12.6 billion in revenue from the More Personal Computing segment that includes Windows, which was lower than StreetAccount's $13.7 billion consensus.
What analysts are saying