Microsoft stock drops 12% after Q2 results as cloud revenues fail to exceed investor expectations

The US-based technology giant, Microsoft stock price dropped 12% during the intraday trading session on Thursday, 29 January 2026, after the company announced its October to December quarter (Q2) results as the cloud revenues failed to exceed investor expectations.

According to a recent Reuters report, Microsoft had spent a record amount on artificial intelligence (AI) in the last quarter and posted slower cloud-computing growth, worrying investors who had expected a major payoff from the outlay and its mega-deal with OpenAI.

The agency report also mentioned that Microsoft executives tried to persuade Wall Street to assess its success in AI by looking not only at its sales from selling cloud computing services, but also at its increasing business selling AI assistants of its own. The company for the first time disclosed core metrics about business usage of its Copilot assistant.

“Microsoft Cloud revenue crossed $50 billion this quarter, reflecting the strong demand for our portfolio of services,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We exceeded expectations across revenue, operating income, and earnings per share.”

What did Satya Nadella say?

After the company's financial results announcement, Microsoft CEO Satya Nadella said that the company is still in the beginning phases of AI diffusion, yet they have built an AI business allegedly larger than some of its biggest franchises.

“Just reported our quarterly results. We are still in the beginning phases of AI diffusion and its broad GDP impact, and already, we’ve built an AI business that is larger than some of our biggest franchises that took decades to build,” said Nadella in his post on X.

Nadella also highlighted that over the last decade, the company's cloud revenue crossed $50 billion in the quarter, compared to annual cloud revenue of $10 billion, ten years ago.

“Our quarterly cloud revenue crossed $50 billion for the first time. What’s striking is it was less than 10 years ago that our annual cloud revenue was $10 billion! (That is what expanding TAM + good execution looks like),” he said.

Microsoft stock price trend

Microsoft stock was trading 12.18% lower at $422.66 as of 11:23 a.m. (IST) during Thursday's trading session, compared to $481.63 at the previous Wall Street close, according to the data collected from MarketWatch. The company announced its second-quarter results for FY2026 during after-market hours on Wednesday.

Microsoft follows a financial year which starts from 1 July and ends on 30 June every year. Hence, October to December quarter marks the end of the second quarter of the financial year ending 2025-26.

Microsoft shares have delivered more than 82% returns on their investment in the last five years. However, the company's stock has lost more than 4% in the last one-year period.

On a year-to-date (YTD) basis, the company's shares have lost 10.38% so far in the year 2025, and are trading 6.09% lower in the last five sessions on the US stock market.

Shares of Microsoft hit its 52-week high level at $555.45, while the 52-week low level was at $344.79, Marketwatch data shows. The company's market capitalisation (M-Cap) stood at $3.58 trillion as of the trading session on Thursday, 29 January 2026.

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Disclaimer: This story is for educational purposes only. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.