Microsoft Tops Earnings Estimates but Stocks Decline
On January 28, 2026, Microsoft Corporation unveiled its fiscal second-quarter results, revealing earnings of $4.14 per share on $81.3 billion in revenue. While these numbers exceeded Wall Street’s expectations of $3.91 per share and $80.3 billion in revenue, Microsoft’s stock took a sharp 6.8% dip after hours. What caused this mixed market reaction? Let’s dive into the details.
Azure Cloud Slowdown Raises Concerns
One of the primary areas of focus was Microsoft’s Azure cloud platform, a key driver of its growth. Azure’s revenue increased by 39% year-over-year for the October-December period, surpassing analyst estimates of 37.8%. However, it marked a slight deceleration compared to the previous quarter’s 40% growth. CFO Amy Hood projected a further slowdown, estimating Azure growth for Q3 to range between 37% and 38% in constant currency, aligning with Wall Street’s expectations of 37.6% but signaling gradual cooling.
AI Spending: Opportunities and Risks
Microsoft’s capital expenditures skyrocketed to $37.5 billion during the quarter, up 66% year-over-year. The majority of this spending—two-thirds, to be exact—was funneled into AI infrastructure, including high-performance computing chips. This is a significant reflection of the company’s commitment to pioneering artificial intelligence, with AI investments crossing over $200 billion since the beginning of fiscal 2024.
One flagship AI product, M365 Copilot, priced at $30 per month, has already garnered 15 million annual subscribers within a short period. Enterprises are increasingly adopting AI tools like this to enhance productivity.
Discover Microsoft 365 Copilot AI Assistant here.
OpenAI Partnership Under the Microscope
Microsoft’s deep relationship with OpenAI also came under scrutiny. OpenAI comprises a huge 45% of Microsoft’s $625 billion commercial backlog. This partnership, while lucrative, raises concerns about overdependence on a single AI provider, especially as competition heats up with Google’s Gemini AI and similar offerings. Additionally, Microsoft also announced a $30 billion cloud deal with Anthropic, diversifying its AI collaborations.
What’s Next for Investors?
Despite the concerns, Microsoft’s strong second-quarter results underscore its leading position in the tech industry—especially in AI and cloud computing. While some analysts express concerns about AI’s high costs and decelerating growth rates, Microsoft’s efforts to expand its portfolio with innovative tools like M365 Copilot position it as a standout player in an increasingly competitive market.
For investors and tech enthusiasts, keeping an eye on Microsoft’s moves in AI and cloud technology would offer significant insights for the months ahead.
