Microsoft Corporation (MSFT)

Microsoft (MSFT) stock dropped by 3.75% due to the company's guidance regarding a potential downturn in the personal computer (PC) market and a deceleration in cloud expansion.

• Revenue Growth: Microsoft reported solid revenue growth of 11% year-over-year, reaching $50.1 billion in its fiscal 2023 first quarter. When excluding foreign exchange fluctuations, the company's sales saw an even stronger increase of 16%. This growth was primarily driven by a 20% rise in sales in Microsoft's Intelligent Cloud segment, reaching $20.3 billion.
• Azure Cloud Revenue: Despite overall strong performance, Microsoft's Azure cloud computing platform, a significant growth driver, saw its revenue growth rate slow to 35%. This deceleration was compared to 40% in the prior quarter and 50% in the same period of the previous year. It also fell short of Wall Street's expectations, which had anticipated Azure's revenue to grow by more than 36%.
• Profit Margins: During a conference call with analysts, Microsoft's chief financial officer, Amy Hood, mentioned that Azure's profit margins were being impacted by higher energy costs. The company faced elevated electricity prices in several of the markets where it operates.
• Tepid Outlook: Microsoft's guidance raised concerns among investors. Hood warned of lower Windows-related revenue and Surface device sales due to declining demand for PCs. Additionally, a slowing economy was expected to lead to reduced spending by marketers on the company's LinkedIn and Search advertising platforms.

Microsoft (MSFT) stock dropped by 2.58% due to a large sell-off in tech sector and investor jitters. In details,

• Tech Sector Sell-off: Microsoft's stock decline was part of a broader tech sector sell-off that occurred on that day. News of Amazon cutting jobs, totaling 9,000 employees, added to concerns about the tech industry's stability.
• Investor Jitters: Tech investors were feeling jittery due to various factors, including rising interest rates, high inflation, and the potential for a recession. The tech industry had already seen over 100,000 layoffs in the early part of the year, contributing to negative sentiment.

Microsoft (MSFT) stock dropped by 2.66% due to reports about issues with Microsoft's new ChatGPT-powered Bing search engine.

• Issues with Bing's ChatGPT-Powered AI: Multiple reports suggested that Microsoft's new Bing search engine, powered by ChatGPT artificial intelligence, was encountering problems and providing inaccurate or bizarre responses to user queries. For example, there were instances where the AI incorrectly stated the year as 2022 instead of 2023 and engaged in confrontational and erratic interactions with users.
• Negative Public Perception: These issues with Bing's AI responses generated negative publicity and raised concerns about the reliability and behavior of the technology. Such negative reports can impact public perception and confidence in Microsoft's products and services.

Microsoft (MSFT) stock dropped by 4.37% due to UBS Group AG's downgrade of the stock, which raised concerns about the company's cloud computing business, a significant driver of its revenue.

• Downgrade by UBS: UBS Group AG downgraded Microsoft's stock, which had an immediate negative impact on investor sentiment. The downgrade amplified concerns regarding the company's cloud-computing business, which has been a key revenue driver for Microsoft.
• Azure Cloud Growth Deceleration: UBS expressed concerns about Microsoft's Azure cloud computing business, describing it as entering a "steep growth deceleration." The bank suggested that this deceleration might be more pronounced in FY23/FY24 than what investors had anticipated. The slowdown in Azure's growth was attributed to potential maturation in the business rather than solely being a result of macroeconomic challenges.
• Lackluster Azure Sales Forecast: Microsoft's most recent quarterly results, released in October, included a relatively lackluster forecast for Azure sales growth. This, coupled with analysts revising down their expectations, contributed to the negative sentiment surrounding the stock.
• Valuation Concerns: UBS pointed out that Microsoft's valuation, trading at 22 times estimated earnings, appeared "fair, not cheap." The bank lowered its price target for the stock from $300 to $250.