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Microsoft Stock Dips After Earnings Amid Cloud Growth Slowdown

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  Published in Stocks and Investing on Wednesday, January 28th 2026 at 19:27 GMT by Seattle Times
      Locales: UNITED STATES, IRELAND

Redmond, WA - January 29th, 2026 - Microsoft shares experienced a significant dip in after-hours trading today following the release of its latest quarterly earnings report. While overall financial results met or exceeded expectations, a noticeable slowdown in the growth of its crucial cloud computing division, coupled with record-high operational spending, triggered investor concern.

The company reported a near 3% decrease in stock value after announcing that revenue from its Intelligent Cloud segment - encompassing the Azure cloud platform - increased by 28% in the most recent quarter. Though still representing substantial growth, this figure fell short of analyst predictions. The segment generated $25.85 billion in revenue.

Microsoft's overall performance presented a mixed picture. Adjusted earnings per share reached $2.98, and total revenue hit $61.86 billion, both surpassing expectations. However, the cloud deceleration overshadowed these positive metrics. Analysts at Piper Sandler emphasized the importance of Azure's past performance, stating, "Azure growth has been a key driver of Microsoft's success in recent years, so investors were understandably disappointed by the deceleration."

The increased scrutiny comes at a time when the cloud computing market is becoming increasingly competitive. Amazon Web Services (AWS), Microsoft's primary rival, also reported weaker-than-anticipated cloud growth yesterday, sliding to a 12% increase--a trend that further dampened market sentiment. This back-to-back reporting of slowing cloud expansion suggests a potential cooling in the previously red-hot cloud market.

Beyond the cloud figures, Microsoft's operational expenses also raised eyebrows. The company's operating expenses surged 19% to $19.87 billion, fueled by aggressive investments in artificial intelligence (AI), expansion of data center infrastructure, and other strategic initiatives. While these investments are seen as crucial for long-term success, they are currently impacting short-term profitability.

"Microsoft is investing aggressively in AI and data centers, which is necessary for long-term growth, but it also puts pressure on short-term profitability," noted analysts at William Blair. This investment strategy suggests Microsoft is prioritizing future market leadership over immediate gains, a gamble that investors are currently evaluating cautiously.

Microsoft's stock had enjoyed a strong rally over the past year, driven by investor confidence in its ability to capitalize on the burgeoning demand for cloud services and AI technologies. The company's cloud business has been a consistent engine of revenue and profit growth. However, the intensifying competition from Amazon, Google, and other players presents a significant challenge.

Looking ahead, Microsoft forecasts revenue growth between 15% and 17% for the current quarter, aligning with analyst estimates. This suggests a stabilization, but not a return to the higher growth rates previously observed in its cloud business. The company is banking on its AI initiatives, particularly integrating AI across its existing product suite like Office 365 and Dynamics 365, to reignite growth.

The pressure is on for Microsoft to demonstrate a clear return on its substantial AI investments. Investors will be closely watching to see how these investments translate into tangible revenue and profit growth in the coming quarters. The current slowdown serves as a reminder that even tech giants are not immune to market fluctuations and competitive pressures, particularly in the rapidly evolving world of cloud computing and artificial intelligence. Furthermore, the parallel deceleration at Amazon suggests a broader industry trend that requires careful consideration.