Microsoft shares slide after hours as cloud growth slows despite earnings beat
The software group shed nearly $180 billion in market value in extended trading after reporting a modest deceleration in Azure growth, overshadowing stronger-than-expected revenue and profit and raising fresh questions over margins and the sustainability of its cloud expansion.
Microsoft shares fell 5% in extended trading on Wednesday after the software maker reported slowing cloud growth, a move that erased almost $180 billion from its market value.
The decline came despite results that exceeded expectations on both revenue and earnings, highlighting investor sensitivity to the pace of expansion in the company’s core cloud business.
Adjusted earnings per share were $4.14, ahead of the $3.97 forecast by analysts, while revenue reached $81.27 billion, compared with expectations of $80.27 billion.
Total revenue rose 16.7% year on year in the fiscal second quarter ended Dec. 31, underlining continued broad-based growth across most divisions.
Net income climbed to $38.46 billion, or $5.16 per share, from $24.11 billion, or $3.23 per share, a year earlier, with adjusted figures excluding the impact of investments in OpenAI.
Microsoft’s gross margin slipped to just over 68%, its narrowest level in three years, reflecting higher costs linked to artificial intelligence infrastructure.
Revenue from Azure and other cloud services increased 39%, slightly below the 40% growth recorded in the prior quarter and marginally under some analyst forecasts.
The company reported $9.97 billion in other income, a sharp swing from a year-earlier expense, driven by a dilution gain following OpenAI’s restructuring.
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Commercial remaining performance obligations rose to $625 billion, up about 110%, with 45% tied to OpenAI’s cloud commitments.
Microsoft’s Intelligent Cloud unit generated $32.91 billion in revenue, while Productivity and Business Processes rose to $34.12 billion, offset by a 3% decline in More Personal Computing.
The Recap
- Microsoft posted fiscal 2026 second-quarter results online on its Investor Relations site.
- Conference call scheduled for 2:30 p.m. Pacific Time with webcast.
- Media and investor contact phone numbers listed in the release.
