Microsoft shares fall, putting pressure on big tech stocks due to disappointing forecasts

Microsoft (MSFT) shares fell Thursday after the company’s revenue forecast missed Wall Street estimates. And The cloud computing giant is struggling to meet demand.

The stock fell nearly 6% Thursday morning, weighing on some of its Big Tech peers. As a result of the downturn, the stock’s annual gain, which was once as high as 24%, has fallen to just 8%.

Microsoft on Wednesday forecast that revenue at its Intelligent Cloud unit will grow 18% to 20% in the current quarter, below analysts’ estimates. Growth for Azure, its cloud computing platform, is expected to be about 31% or 32%, down from the last quarter and slightly slower than Wall Street expected. The disappointing forecast overshadowed the company’s fiscal first-quarter results, which generally beat expectations.

Microsoft is struggling to meet growing demand for AI, and executives expect that challenge to continue in the current quarter. CFO Amy Hood expressed confidence during the company’s earnings call that growth will accelerate in the first half of next year as more cloud computing capacity comes online.

What do analysts think about Microsoft’s earnings?

Analysts on Thursday were upbeat about the outlook. They pointed to comments from executives indicating that demand for artificial intelligence services remains strong and that the company’s increased spending on artificial intelligence infrastructure should help it meet that demand in the future.

“While Azure’s second-quarter guidance is disappointing, underlying trends such as strong deal volumes confirm that demand is not an issue,” BofA analysts wrote in a note to clients on Thursday. They maintained a Buy rating on the stock and a $510 price target.

Jefferies analysts also reiterated their Buy recommendation and $550 target price. “We remain confident that MSFT will be a winner in the AI ​​space,” the analysts wrote.

Microsoft weighs in on big tech stocks

Microsoft’s results weighed on technology stocks on Thursday. Shares of Amazon (AMZN) were down more than 2% Thursday morning, while shares of AI chip giant Nvidia (NVDA) were down nearly 4%. Shares of Oracle (ORCL), another cloud computing provider focused on artificial intelligence, fell about 3%.

Shares of Meta (META) fell more than 2% after the company raised the lower end of its full-year capital expenditure (CapEx) guidance as it ramps up spending on AI. Concerns about excessive AI infrastructure spending weighed on mega-cap tech stocks during their last round of earnings reports in July.

Rising capital spending is likely to remain a focus on Wall Street when Amazon reports results after the close on Thursday.