MSFT stock price today: Why is Microsoft stock falling despite strong earnings? Here's what’s worrying investors

Core Viewpoint - Microsoft reported strong second-quarter earnings, exceeding Wall Street expectations, but its stock fell over 3% due to concerns about rising costs associated with AI investments [1][2][14]. Financial Performance - Microsoft posted earnings per share of $5.16 on revenue of $81.27 billion, surpassing analyst estimates of $3.92 in EPS and $80.3 billion in revenue [3][15]. - Cloud revenue reached $51.5 billion, marking a significant increase from $40.9 billion a year earlier [3][15]. Segment Performance - The Intelligent Cloud segment, including Azure, generated $32.9 billion in revenue, exceeding expectations of $32.2 billion [7][16]. - Productivity and Business Processes revenue, which includes Microsoft 365, came in at $34.1 billion, also above Wall Street estimates [7][16]. - The More Personal Computing segment, which includes Windows, Surface, and Xbox, generated $14.3 billion in revenue, matching expectations [8][16]. AI Business Insights - CEO Satya Nadella highlighted the growth of Microsoft's AI business, stating it is larger than some of the company's biggest franchises [4][16]. - The company's remaining performance obligations, a key indicator of future revenue, rose to $625 billion, with approximately 45% linked to OpenAI commitments [10][16]. Future Outlook - Microsoft faces AI capacity constraints, with demand for AI services exceeding supply, which is limiting near-term revenue [11][16]. - CFO Amy Hood indicated that capital expenditures are expected to increase in fiscal 2026 beyond last year's $88.2 billion [12][16]. - Despite being a major beneficiary of the AI surge, Microsoft’s stock has pulled back as investors assess the scale of AI-related spending [13][16].