Microsoft just had its worst trading day in nearly six years. The tech giant shed $357 billion in market value on Thursday after investors dumped shares following an earnings report that revealed cracks in its cloud dominance. The 10% plunge—the steepest since March 2020's pandemic panic—sent shockwaves through the entire software sector and dragged the S&P 500 lower, underscoring how much Wall Street's fate now hinges on a handful of AI infrastructure bets.
Microsoft just erased more than a third of a trillion dollars in a single trading session. The $357 billion wipeout on Thursday left the company valued at $3.22 trillion and marked its worst stock performance since the early pandemic chaos of March 2020, according to CNBC. The selloff wasn't isolated—it cascaded through the entire software sector, pulling down the iShares Expanded Tech-Software Sector ETF by 5% and pressuring the broader market.
The carnage stemmed from Microsoft's fiscal second-quarter earnings report, which revealed three key disappointments that shattered investor confidence. Azure and other cloud services grew 39%—just shy of StreetAccount's 39.4% consensus but enough to trigger alarm bells. The More Personal Computing segment, which includes Windows, came in with guidance of about $12.6 billion for the fiscal third quarter, well below the $13.7 billion analysts expected. And the implied operating margin for the coming quarter fell short of projections.
Wall Street had been banking on Microsoft's ability to translate massive AI infrastructure spending into accelerating cloud growth. When that didn't materialize, the market reacted swiftly. The tech-heavy Nasdaq Composite closed down 0.7% on Thursday, though not all tech stocks suffered—Meta shares soared 10% after delivering robust results that contrasted sharply with Microsoft's stumble.
CFO Amy Hood attempted damage control during the earnings call, arguing that the Azure number would have been higher if Microsoft hadn't prioritized internal AI needs over customer allocations. "If I had taken the GPUs that just came online in Q1 and Q2 in terms of GPUs and allocated them all to Azure, the KPI would have been over 40," Hood said. But that explanation only raised more questions about Microsoft's strategic priorities.
