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
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.
-
Three Common Cash Flow Mistakes and How to Fix Them
Better cash flow management could have a bigger impact on your retirement savings than simply making more money. Here's how to manage that.
By Mike Decker, NSSA® Published
-
Trusts for Child Influencers: What Families Need to Know
As video blogging, or vlogging, gains popularity (and profitability), new laws are shaping financial obligations for caregivers of young creators.
By Stephen B. Dunbar III, JD, CLU Published
-
Three Common Cash Flow Mistakes and How to Fix Them
Better cash flow management could have a bigger impact on your retirement savings than simply making more money. Here's how to manage that.
By Mike Decker, NSSA® Published
-
Trusts for Child Influencers: What Families Need to Know
As video blogging, or vlogging, gains popularity (and profitability), new laws are shaping financial obligations for caregivers of young creators.
By Stephen B. Dunbar III, JD, CLU Published
-
Three Easy Financial Tips to Help Make This Year a Success
Early in a new year is the perfect time to assess where you are financially. Start by ensuring you're protected from fraud and evaluating your investments.
By Matthew Sommer, Ph.D. CFA® Published
-
Stock Market Today: It's Mostly Onward and Upward for Equities
The major U.S. equity indexes were mixed Friday but closed an eventful week for earnings and data modestly higher.
By David Dittman Published
-
Airbnb Stock Soars After Revenue, Earnings Top Expectations
Airbnb stock soared Friday after the homestay and experiences platform beat fourth-quarter revenue and earnings expectations. Here's what you need to know.
By Joey Solitro Published
-
Roku Expects to Be Profitable Next Year and Its Stock Is Soaring
Roku stock is surging Friday after the streaming platform topped Q4 expectations and said it expects to be profitable in 2026. Here's what you need to know.
By Joey Solitro Published
-
Why Coinbase Stock Is Lower After a Blowout Earnings Report
Coinbase stock is tumbling Friday as investors take profits following the crypto platform's impressive fourth-quarter results. Here's what you need to know.
By Joey Solitro Published
-
Are You a 'Midwestern Millionaire'? Four Retirement Strategies
Midwestern Millionaires might not live in the Midwest, but they share a saver's mindset. These strategies are for those who have saved $1 million or more.
By Joe F. Schmitz Jr., CFP®, ChFC® Published