Microsoft Stock Falls 6% Due to Revenue Outlook
Redmond, Friday, 31 January 2025.
Microsoft’s stock fell 6% on January 29, 2025, due to underwhelming revenue guidance, highlighting challenges in sustaining growth, particularly within Azure.
Market Response to Earnings
Microsoft (NASDAQ: MSFT) experienced a significant stock decline of 6.2% despite exceeding fiscal second-quarter expectations [1]. The tech giant reported impressive earnings of $3.23 per share on revenue of $69.63 billion, surpassing analyst projections of $3.11 per share and $68.78 billion [1]. However, the company’s year-over-year revenue growth of 12.3% marks the slowest pace since mid-2023 [1].
Cloud Performance and Guidance
The primary catalyst for the stock decline was Microsoft’s conservative revenue guidance for the current quarter. Chief Financial Officer Amy Hood projected revenue between $67.7 billion and $68.7 billion, falling short of the $69.78 billion anticipated by analysts [1]. Azure and other cloud services showed a growth rate of 31%, a slight deceleration from the previous quarter’s 33% [1]. Despite these challenges, Microsoft’s cloud segment generated total revenue of $40.9 billion, representing a 21% increase year-over-year [2].
AI Growth and Future Outlook
A bright spot in Microsoft’s results was the significant expansion of its AI business, which achieved a revenue run rate exceeding $13 billion, marking a remarkable 175% year-over-year increase [2]. CEO Satya Nadella remained optimistic about the company’s AI trajectory, emphasizing their focus on helping customers maximize AI investments [2]. Looking ahead, analysts project Microsoft’s earnings to grow by 12.8% per annum, with revenue expected to increase by 12.5% annually [3].
Broader Market Context
The market response to Microsoft’s guidance comes amid broader tech sector dynamics, including increased competition in the AI space. Notably, the company’s stock movement was partially influenced by market reaction to developments from competitors like DeepSeek, a Chinese startup making waves with cost-effective AI models [1]. Despite these challenges, analysts maintain a positive long-term outlook, with Goldman Sachs analyst Kash Rangan noting that Microsoft remains well-positioned to benefit from AI adoption [1].