Microsoft stock suffers worst day in two years on disappointing expectations | Wilnesh News

MicrosoftThe better-than-expected earnings report wasn’t enough to stem the stock’s worst sell-off in two years, as investors turned to the company’s forecasts for the current period.

Microsoft shares fell more than 5% on Thursday, marking their worst day since October 26, 2022, when they fell 7.7%. A month later, Microsoft-backed OpenAI publicly released ChatGPT, a release that laid the foundation for a boom in artificial intelligence investment.

For the fiscal year ending in December, Microsoft expects revenue to be between $68.1 billion and $69.1 billion, which would imply growth of 10.6% in the middle of that range. Analysts polled by London Stock Exchange Group (LSEG) expected revenue of $69.83 billion.

Revenue from Microsoft’s cloud infrastructure business, Azure, grew 33%. On a conference call with analysts, Chief Financial Officer Amy Hood said fiscal second-quarter growth would be 31% to 32% on a constant currency basis.

Tuesday, Google Its competitor’s cloud business grew at an annual rate of 35%, reaching $11.35 billion. AmazonThe company leading the cloud infrastructure market is scheduled to report results after the market close on Thursday.

“We view first-quarter Azure and Office core growth business results as solid, despite a weaker second-quarter outlook,” Bank of America Global Research analysts wrote in a note Thursday. They still recommend buying the stock.

first fiscal quarter income According to LSEG data, it increased 16% year-on-year to US$65.59 billion, exceeding analysts’ average forecast of US$64.51 billion. Earnings per share were $3.30, beating the average estimate of $3.10.

Net profit increased 11% to US$24.67 billion from US$22.29 billion in the same period last year.

The delay in external vendors providing data center infrastructure to Microsoft means the company will not be able to meet demand in the fiscal second quarter.

“I feel good that even as we move into the second half of the fiscal year, some supply and demand will match,” Chief Executive Satya Nadella said on the earnings call.

Microsoft’s artificial intelligence investments remain a major focus for investors as the company builds out infrastructure and increases spending on chips to handle heavier workloads. Microsoft has invested nearly $14 billion in OpenAI, which was valued at $157 billion in a funding round earlier this month.

Hood said on the conference call that she expects the company’s revenue to fall by $1.5 billion in the current period, mainly due to an expected loss on the investment in the artificial intelligence startup.

Meanwhile, property and equipment spending increased 50% year over year to $14.92 billion. The consensus among analysts surveyed by Capital IQ was $14.58 billion.

As of noon Thursday, Microsoft shares were up just over 9% for the year, while the Nasdaq was up 21% over the same period.

—CNBC’s Ari Levy contributed to this report.