Microsoft (MSFT) shares plunged on Thursday, falling more than 10% despite the company reporting better-than-expected earnings and revenue for its fiscal second quarter. The drop puts the stock on track for its worst single-day decline since March 2020, as investors remain concerned about near-term cloud growth and rising AI-related spending.
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Market Reacts to Microsoft’s Earnings
Microsoft reported adjusted earnings of $4.14 per share, beating Wall Street estimates of $3.91. Meanwhile, revenue rose 17% year over year to $81.27 billion, also topping expectations. At the same time, cloud demand remained strong, with commercial bookings up 230%, driven by large commitments from OpenAI and Anthropic, along with steady demand for Azure.
Despite the beat, the stock sold off sharply. Investors appeared worried that demand for AI services is rising faster than Microsoft can supply it, limiting near-term revenue growth. Management also said capital spending will remain elevated as the company builds more data-center capacity, raising concerns about margins in the coming quarters.
What Does TipRanks’ Crowd Wisdom Show?
Despite the sharp drop, broader investor behavior tells a different story. Microsoft holds a Positive investor sentiment based on the activities of over 851,000 investors in the recent quarter.
TipRanks’ Crowd Wisdom tool shows that 12% of all tracked portfolios currently hold Microsoft, with investors allocating an average of 9.34% of their portfolios to the stock. More notably, portfolio additions have continued. Over the past seven days, the number of portfolios holding Microsoft increased by 0.5%. Over the past 30 days, holdings rose by 2.4%, based on activity across more than 851,000 investor portfolios.
Investor sentiment remains positive, suggesting many investors see the sell-off as a short-term reaction rather than a sign of deeper trouble.
What Top Analysts Are Saying
Despite the sell-off, Wall Street reactions were mostly positive. For instance, UBS analyst Karl Keirstead kept a Buy rating on Microsoft and maintained a $600 price target. The five-star analyst said MSFT stock fell because Azure growth came in slightly below expectations and Microsoft 365 growth missed UBS’s estimate. Still, Keirstead said Microsoft’s backlog and future capacity remain strong, which supports his Buy view despite near-term pressure.
Likewise, Cantor Fitzgerald analyst Thomas Blakey kept an Overweight rating on Microsoft with a $590 price target. Blakey said Microsoft delivered solid growth across its business, pointing to strong uptake of Copilot products and 38% constant-currency growth in Azure. He added that higher capital spending weighed on the stock, though Microsoft expects capex to ease next quarter.
What Is the Price Target for Microsoft?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 33 Buys and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average MSFT price target of $603.95 per share implies 39.32% upside potential.
