Microsoft lost $357 billion in market cap as stock plunged most since 2020

Microsoft's stock experienced a significant decline of nearly 10% on Thursday, resulting in its largest drop since March 2020. This plunge followed an earnings report that failed to meet investor expectations, leading to a staggering decrease of $357 billion in the company's market capitalization, which settled at approximately $3.22 trillion by the close of trading. The broader tech sector also felt the impact, with the iShares Expanded Tech-Software Sector ETF falling by 5% and the Nasdaq Composite index dipping by 0.7%. However, not all tech giants faced the same fate; Meta's shares surged by 10% after the company delivered strong quarterly results and impressive revenue forecasts. Investors expressed concerns over specific performance metrics in Microsoft's report. The crucial growth figure for Azure and other cloud services was reported at 39%, slightly below the anticipated 39.4% consensus from StreetAccount. Additionally, revenue expectations for the More Personal Computing segment, which encompasses Windows, were set at approximately $12.6 billion, falling short of the $13.7 billion consensus. Microsoft's finance chief, Amy Hood, noted that the cloud service performance could have been stronger if the company had allocated more data center resources to customers rather than focusing on internal needs. "If I had taken the GPUs that just came online in Q1 and Q2 and allocated them all to Azure, the KPI would have been over 40," she explained. Amidst the turmoil, analyst Ben Reitzes from Melius Research, who maintains a buy rating on Microsoft, emphasized the importance of accelerating data center construction to improve Azure's performance. He stated, "There’s an execution issue here with Azure, where they need to literally stand up buildings a little faster." Meanwhile, UBS analysts, led by Karl Keirstead, scrutinized Microsoft's strategy of securing AI computing resources for products like the Microsoft 365 Copilot. They expressed doubts about the growth potential of M365 revenues linked to Copilot, noting that early indicators did not suggest a significant increase in usage. The analysts urged Microsoft to demonstrate the value of its investments in these areas. On a more positive note, Bernstein analysts, led by Mark Moerdler, commended Microsoft's long-term vision, suggesting that management made a deliberate choice to prioritize the company’s future over short-term stock performance. They asserted that investors should recognize this strategy as a wise approach for sustainable growth. Hood indicated that capital expenditures are expected to see a slight decrease in the upcoming quarter, reflecting a cautious but strategic adjustment to the company's operations.