Tech Giant’s Shares Take a Hit Despite Strong Earnings
Microsoft’s stock price plummeted by 5% after the company released its quarterly earnings report, despite beating Wall Street’s estimates. The software giant posted earnings of $3.23 per share on $69.63 billion in revenue, surpassing analyst forecasts. However, the company’s finance chief, Amy Hood, tempered expectations by predicting revenue for the current quarter to fall between $67.7 billion and $68.7 billion, short of the $69.78 billion forecast.
Revenue Growth Slows Down
Microsoft’s revenue growth rate slowed to 12.3% year over year, the lowest since mid-2023. The company’s Azure and other cloud services revenues also experienced a slowdown, growing by 31% compared to 33% in the previous quarter.
Analysts Remain Bullish
Despite the disappointing guidance and Azure slowdown, many Wall Street analysts remain optimistic about Microsoft’s prospects. Goldman Sachs analyst Kash Rangan believes the company is “well-positioned” to benefit from artificial intelligence adoption, making it one of the most compelling investment opportunities in the industry.
AI Business Takes Center Stage
Microsoft CEO Satya Nadella highlighted the company’s AI business during the earnings call, announcing that DeepSeek’s R1 model is now available through GitHub and Azure AI Foundry. The model will also be accessible on Copilot+ PCs in the future. This move is seen as a strategic pivot towards the core Azure business, independent of AI.
Broader Tech Sector Selloff
Microsoft’s shares dropped 2% on Monday, part of a broader tech sector selloff, as investors assessed the impact of DeepSeek’s AI models. Estimates suggest that the China startup trained its open-source model at a fraction of the cost of competing U.S. products.
What’s Next for Microsoft?
As Microsoft navigates the changing tech landscape, investors will be watching closely to see how the company adapts to the AI revolution. With its strong earnings report and bullish analyst sentiment, Microsoft remains a key player in the industry. However, the company must continue to innovate and pivot to stay ahead of the competition.
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