Why Microsoft Stock Plunged on Thursday

By Danny Vena, CPA – Jan 29, 2026 at 12:04PM ESTKey PointsMicrosoft reported quarterly earnings that beat expectations, but investors wanted more.The company continues to spend heavily on capex to meet demand for artificial intelligence and cloud services. We’re bullish on these 10 stocks ›NASDAQ: MSFTMicrosoftMarket Cap$3.6TToday's Changeangle-down(-12.05%) $58.05Current Price$423.58Price as of January 29, 2026 at 1:45 PM ETSometimes, good simply isn't good enough.Shares of Microsoft (MSFT 12.05%) were taken out to the woodshed Thursday morning, plunging as much as 12.6%. As of 11:58 a.m. ET, the stock was still down 11.8%. The catalyst that sent the tech giant tumbling was its quarterly earnings report. Despite delivering solid results, investors wanted more. Image source: Getty Images. For its fiscal 2026 second quarter (ended Dec. 31), Microsoft delivered revenue of $81.3 billion, an increase of 17% year over year and 15% in constant currency. This drove adjusted earnings per share (EPS) to $4.14, an increase of 24% or 21% in constant currency. The adjusted results excluded the impact of its OpenAI investment. For context, analysts' consensus estimates were calling for revenue of $80.3 billion and EPS of $3.92, so Microsoft easily surpassed Wall Street's expectations. Overall, Microsoft's major business units delivered. The company's productivity and business processes segment grew revenue by 16% to $34.1 billion, while the more personal computing segment delivered revenue of $14.3 billion, a decline of 3%. Intelligent cloud revenue of $51.5 billion increased 29%, while Azure Cloud increased 39%. All three segments edged past expectations, but investors wanted more. ExpandNASDAQ: MSFTMicrosoftToday's Change(-12.05%) $-58.05Current Price$423.58Key Data PointsMarket Cap$3.6TDay's Range$421.04 - $442.4652wk Range$344.79 - $555.45Volume4.3MAvg Vol26MGross Margin68.76%Dividend Yield0.71% There was also some concern about Microsoft's capital expenditures (capex) of $37.5 billion in Q2, up from $26.6 billion in the prior-year quarter. Microsoft continues to struggle to supply sufficient cloud and data center capacity to meet existing AI demand. Management continues to balance capex spending against AI demand as it builds out its data center infrastructure -- where nearly all its AI services reside. After today's shellacking, Microsoft's trailing 12-month price-to-earnings (P/E) ratio has fallen to 30, putting it in line with many of the other tech giants. Management noted that its cloud and AI growth would vary from quarter to quarter as additional capacity comes online and that Microsoft is building for the long term. As such, I view today's drubbing as a buying opportunity, particularly for long-term investors. Nothing to see here, folks. Move along.Read NextJan 29, 2026 •By Adria CiminoMicrosoft Stock Just Did Something It Hasn't Done in 1 Year. Here's What May Happen Next.Jan 29, 2026 •By Sean WilliamsBillionaire Ole Andreas Halvorsen Dumped His $39 Billion Fund's Stakes in Nvidia and Amazon for Another Trillion-Dollar SuperstarJan 28, 2026 •By Catie HoganPrediction: This Artificial Intelligence (AI) Stock Will Crush the Market in 2026Jan 27, 2026 •By John BallardThe Best Stocks to Invest $2,000 Right NowJan 27, 2026 •By Danny Vena, CPAMicrosoft Releases Powerful New AI Chip to Take on NvidiaJan 27, 2026 •By James BrumleyForget Quantum Computing Stocks: This Unavoidable Platform Is Where Big Customers Are Actually GoingAbout the AuthorDanny Vena, CPA, is a contributing Motley Fool technology analyst specializing in artificial intelligence, cloud computing, semiconductors, software, cybersecurity, and consumer electronics. He is a Certified Public Accountant and previously worked as a controller and accountant across small and midsize businesses. Danny also served 13 years in the U.S. Army. He holds a bachelor’s degree in accounting from the University of Phoenix.TMFLifeIsGoodX@dannyvenaStocks MentionedMicrosoftNASDAQ: MSFT$423.58 (0.12%) $58.05*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.