Microsoft's Market Cap Drops $357 Billion After Earnings Shock
By John Nada·Jan 29, 2026·3 min read
Microsoft's stock fell nearly 10% after a disappointing earnings report, resulting in a $357 billion drop in market cap, the largest since March 2020.
Microsoft's shares plummeted nearly 10% on Thursday, resulting in a staggering $357 billion loss in market capitalization. This sharp decline marks the company's steepest fall since March 2020, leaving its market cap at $3.22 trillion at the close of trading, according to CNBC Business. This downturn followed an earnings report that failed to meet investor expectations.
The iShares Expanded Tech-Software Sector exchange-traded fund tumbled 5%, and the Nasdaq Composite index ended down 0.7%. However, not all tech stocks suffered; Meta's shares surged 10% after delivering impressive results and positive revenue guidance.
Investors pointed to weaknesses in Microsoft's performance, particularly in the growth of its Azure and cloud services, which registered a growth rate of 39%, falling short of the consensus estimate of 39.4%. Additionally, the company projected $12.6 billion in fiscal third-quarter revenue from its More Personal Computing segment, which was below the expected $13.7 billion. The implied operating margin for the upcoming quarter also disappointed.
Microsoft’s finance chief, Amy Hood, suggested that results for Azure could have been stronger had the company prioritized customer needs over its own data center requirements. She noted that reallocating resources could have boosted key performance indicators significantly.
Analyst Ben Reitzes from Melius Research, who maintains a buy rating on Microsoft stock, emphasized the need for faster data center construction. He indicated that execution issues with Azure are critical and must be addressed quickly. Meanwhile, UBS analysts raised concerns about Microsoft’s strategy in securing artificial intelligence computing capacity for products like Microsoft 365 Copilot, which has not yet matched the success of OpenAI's ChatGPT.
The UBS team noted that growth rates for M365 revenues are stagnant, with indications of weak usage ramp for Copilot. They stressed that Microsoft must demonstrate that its AI investments are sound.
In contrast, Bernstein analysts, led by Mark Moerdler, expressed support for Microsoft's long-term strategy, suggesting that investors should appreciate management's focus on sustainable growth rather than short-term stock performance. They believe that decisions made are aimed at benefiting the company over the long haul, particularly as capacity constraints ease.
Hood indicated that capital expenditures would see a slight decline in the current quarter, which may suggest a shift in focus for the company moving forward. This earnings report has raised significant questions about Microsoft’s strategy and its capacity to adapt in a competitive tech landscape.
The implications of this earnings miss extend beyond just Microsoft, reflecting broader trends in the tech sector and raising concerns among investors about growth trajectories in cloud services and AI applications. As companies navigate these challenges, the path forward for Microsoft will be closely scrutinized by analysts and investors alike. The market will be watching to see if Microsoft can rebound and restore investor confidence amid these setbacks.