MSFT stock price: Microsoft shares slid in extended trading Wednesday despite the company delivering a solid second-quarter earnings beat, as investors looked past the headline numbers and focused on the rising costs tied to the AI boom.

MSFT Stock Slides Despite Strong Microsoft Earnings Beats Estimates on Revenue and EPS

Microsoft (MSFT) reported earnings after the bell that topped Wall Street expectations on both revenue and profit, with cloud revenue crossing the $50 billion mark for the first time, as per a report. Still, the stock fell more than 3% after the earnings were announced.

For the quarter, Microsoft posted earnings per share of $5.16 on revenue of $81.27 billion, beating analyst estimates of $3.92 in EPS and $80.3 billion in revenue, as per a Yahoo Finance report. Microsoft Cloud revenue reached $51.5 billion, slightly ahead of forecasts and up sharply from $40.9 billion a year earlier.

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Satya Nadella Highlights Expanding AI Business

CEO Satya Nadella emphasized the company’s growing AI business, saying “We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises," as quoted by Yahoo Finance. He added, “We are pushing the frontier across our entire AI stack to drive new value for our customers and partners."

Microsoft Earnings Highlight Strength in Intelligent Cloud and Azure

Microsoft’s results once again highlighted how central cloud and AI have become to its business. The Intelligent Cloud segment, which includes Azure, generated $32.9 billion in revenue, beating expectations of $32.2 billion. Productivity and Business Processes revenue, which includes Microsoft 365 Commercial and Consumer Cloud, came in at $34.1 billion, also ahead of Wall Street estimates.

Other parts of the business were steadier. The More Personal Computing segment, which includes Windows, Surface, and Xbox, generated $14.3 billion in revenue, matching expectations.

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MSFT Stock: OpenAI Ties Drive Future Growth Outlook

The company’s remaining performance obligations, a closely watched indicator of future revenue, climbed to $625 billion. About 45% of that total is tied to OpenAI commitments, underscoring how deeply Microsoft’s growth story is linked to artificial intelligence.

MSFT Stock Price Falls as AI Spending Weighs on Sentiment

However, Microsoft said it continues to face AI capacity constraints, with demand for AI services exceeding its ability to supply them. Those limits are capping near-term revenue and helping explain why the company is ramping up spending.

Microsoft Stock Price Outlook Amid Rising Capital Expenditures

Chief Financial Officer Amy Hood said Microsoft expects to increase capital expenditures in fiscal 2026 beyond last year’s $88.2 billion, as per the Yahoo Finance report.

Microsoft Shares Trail Google Despite AI Leadership Position

Microsoft has been one of the biggest beneficiaries of the AI surge, helped by its early investment in OpenAI. That momentum pushed its market capitalization above $4 trillion in July, though the stock has since pulled back as investors weigh the scale of AI-related spending. Over the past 12 months, Microsoft shares are up about 7%, slightly ahead of Amazon’s 2% gain, but well behind Google’s 69% surge over the same period.

FAQs

Why did MSFT stock fall despite strong earnings?
Investors focused on rising AI costs and higher future spending.

Did Microsoft beat earnings expectations?
Yes. Microsoft exceeded Wall Street estimates on both revenue and earnings per share.