What Caused Microsoft to Lose $357 Billion in Market Cap?

Microsoft's recent stock plunge led to a staggering $357 billion reduction in its market capitalization, marking the largest single-day loss since March 2020. The decline primarily stemmed from disappointing earnings that revealed slower growth in the company's crucial Azure cloud segment.

Why Did Microsoft’s Stock Plunge So Dramatically?

On January 29, 2026, Microsoft saw its shares fall nearly 10% following the release of its quarterly earnings report, which didn't meet investor expectations. The company's stock ended the trading day at around $3.22 trillion in market capitalization.

Key figures from the earnings report included:

• Azure Growth: The growth rate for Azure cloud services dropped to 39%, down from 40% in the previous quarter. Analysts were expecting a slightly higher figure around 39.4%[^1].
• Revenue Projections: The estimate for revenue from Microsoft’s More Personal Computing segment came in around $12.6 billion, significantly lower than the $13.7 billion consensus[^1].
  

Microsoft's finance chief, Amy Hood, suggested that the company could have achieved a higher growth metric for Azure if it had prioritized external customer needs over internal applications. She stated, “If I had taken the GPUs that just came online in Q1 and Q2… the KPI would have been over 40”[^1].

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What Are Analysts Saying About the Future?

Despite the significant drop in stock price, many analysts remain optimistic about Microsoft's long-term prospects and point out that the market may be overly fixated on Azure's immediate growth metrics.

Morgan Stanley analyst Keith Weiss noted, "Investors are not seeing the forest for the trees," emphasizing that Azure's growth remains strong compared to the market[^3]. This sentiment was echoed across various financial institutions, with several analysts retaining buy ratings on Microsoft while slightly adjusting their price targets downward[^3].

Is Microsoft's Investment in AI Paying Off?

Microsoft has made substantial investments in AI technologies, but some analysts question whether these will yield immediate returns. While Azure’s slower growth has raised concerns, part of Microsoft's strategy involves reallocating resources to support AI-focused applications like Microsoft 365 Copilot[^3].

Analysts from Goldman Sachs posited that the stock’s negative response may stem from the loss of Azure growth without a corresponding rise in overall productivity from its AI investments. This continues to be an area of keen interest among analysts and investors alike[^3].

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Key Takeaways

• Microsoft lost $357 billion in market capitalization, marking its worst stock drop since March 2020.
• Azure's growth slowed to 39%, slightly below analyst expectations.
• Microsoft is prioritizing internal applications over external demand, resulting in missed opportunities.
• Analysts remain optimistic about Microsoft's long-term strategy and capacity growth despite the current dip in stock prices.
• The company's substantial investment in AI continues to be analyzed for its potential returns.
  

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References

[^1]: Jordan Novet (2026). "Microsoft lost $357 billion in market cap as stock plunged most since 2020 (https://www.cnbc.com/2026/01/29/microsoft-market-cap-earnings.html)". CNBC. Retrieved January 29, 2026.

[^2]: Samantha Subin (2026). "Meta soars after proving AI spend while Microsoft struggles to please (https://www.cnbc.com/2026/01/29/meta-microsoft-stock-earnings-moves-tech.html)". CNBC. Retrieved January 29, 2026.

[^3]: Lisa Kailai Han (2026). "Not seeing the forest for the trees: Analysts look past Azure miss as Microsoft slides post-earnings (https://www.cnbc.com/2026/01/29/analysts-look-past-azure-miss-as-microsoft-slides-post-earnings.html)". CNBC. Retrieved January 29, 2026.

Main Keywords/Tags: Microsoft, Stock Market, Azure, Earnings Report, Market Cap Loss, AI Investments

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