Why Microsoft Stock Is Sinking After Earnings
Microsoft is the worst Dow Jones stock Thursday as the tech giant's soft outlook offsets an earnings beat. Here's what you need to know.


Microsoft (MSFT) stock is the worst Dow Jones stock Thursday, down nearly 6% at last check, after the tech giant beat top- and bottom-line expectations for its fiscal 2025 second quarter but issued a soft outlook for its third quarter.
In the three months ending December 31, Microsoft's revenue increased 12.3% year over year to $69.6 billion, led by 21% growth in Microsoft Cloud revenue to $40.9 billion. Its earnings per share (EPS) rose 10.2% from the year-ago period to $3.23.
"We delivered another quarter of double-digit top and bottom-line growth," said Microsoft Chief Financial Officer Amy Hood in a statement. "Results were driven by strong demand for our cloud and AI [artificial intelligence] offerings while we also improved our operating leverage with higher-than-expected operating income growth."

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results topped analysts' expectations. Wall Street was anticipating revenue of $68.8 billion and earnings of $3.11 per share, according to CNBC.
However, sentiment turned negative toward Microsoft when it provided an outlook for its fiscal third quarter on its conference call. The company expects revenue in the range of $67.7 billion to $68.7 billion, which came in well below analysts' expectations for revenue of $69.8 billion.
Brian Mulberry, client portfolio Manager at Zacks Investment Management, says Wall Street could also be disappointed in the company's 31% year-over-year revenue growth in Azure, its cloud computing platform, which slightly missed analysts' estimates for 32% growth.
"This has been a key component of both revenue growth and profitability that will be critical in funding the capex projects announced around AI infrastructure," Mulberry notes. " Long term, the balance sheet looks healthy and the revenue growth is still a net positive."
Is Microsoft stock a buy, sell or hold?
Microsoft has been choppy on the price charts over the past 12 months, up roughly 9% vs the S&P 500's 23% gain. But Wall Street is keeping the faith on the blue chip stock.
According to S&P Global Market Intelligence, the average analyst target price for MSFT stock is $507.47, representing implied upside of about 20% to current levels. Additionally, the consensus recommendation is Strong Buy.
Financial services firm Wedbush maintained its Outperform rating (equivalent to a Buy) and $550 price target following the earnings release.
"Overall, there was some weak spots along with a 2% currency headwind next quarter that could put some pressure on shares this morning," says Wedbush analyst Dan Ives. "That said, we are laser-focused on the AI piece of this MSFT story and all metrics were ahead of expectations which give us added confidence in the AI Revolution bull thesis for Redmond into the rest of fiscal year 2025."
Related Content
- If You'd Put $1,000 Into Microsoft Stock 20 Years Ago, Here's What You'd Have Today
- Earnings Calendar and Analysis for This Week
- Is Meta Stock a Buy, Hold or Sell After Earnings?
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Ten Cheapest Places To Live in Florida
Property Tax Make your Florida vacation spot daily living — these counties have the lowest property tax bills in the state.
By Kate Schubel
-
I'm 50 and my home is worth $5 million. Can I retire now?
It may be oh-so tempting to cash out your upscale home and leave work for good. But should you? We ask the experts.
By Maurie Backman
-
Tesla Stock Pops as Elon Musk Promises DOGE Draw Back
Tesla reported a sharp drop in first-quarter earnings and sales, as the EV maker suffered a backlash to its CEO's political ambitions.
By Karee Venema
-
Bouncing Back: New Tunes for Millennials Trying to Make It
Adele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
By Alvina Lo
-
Early-Stage Startup Deals: How Do Convertible Notes Work?
Some angel investors support early startups by providing a loan in exchange for a convertible note, which includes annual interest and a maturity date.
By Murat Abdrakhmanov
-
Stock Market Today: Stocks Soar on China Trade Talk Hopes
Treasury Secretary Bessent said current U.S.-China trade relations are unsustainable and signaled hopes for negotiations.
By Karee Venema
-
How Can Investors Profit From AI's Energy Use?
Global energy demand is expected to grow by leaps and bounds over the next several years as AI usage accelerates. Here's how to get a piece of the pie.
By Jacob Schroeder
-
Can Trump Fire Powell? A Supreme Court Case Could Decide
Presidential posts threaten to overwhelm decades of precedent and tradition, whatever the nine justices decide.
By David Dittman
-
What Are AI Agents and What Can They Do for You?
AI agents promise to be the next big thing in artificial intelligence, but what exactly do they do?
By Tom Taulli
-
Should You Buy an iPhone Now Before Tariffs Hit?
Looming tariffs can make an iPhone purchase seem urgent. Here's what to do if you need another phone but want to save money.
By Laura Gariepy