Why This Pullback in Microsoft (MSFT) is a Buying Opportunity

Core Insights - U.S. stocks ended flat following the Fed's decision to keep interest rates unchanged, with only two governors dissenting for a rate cut [1] - Fed Chair Powell indicated that future rate hikes are not the base case, but economic growth may challenge further easing [2] - Treasury Secretary mentioned a potential dovish pick for Fed Chair could positively impact major indexes, particularly the Nasdaq [3] Microsoft Earnings Overview - Microsoft reported fiscal Q2 2026 results with revenue of $81.3 billion, a 17% year-over-year increase, surpassing expectations [6] - Cloud revenue reached $51.5 billion, up 26%, highlighting its role as the primary growth engine [6] - Intelligent Cloud division generated $32.9 billion in revenue, up 29%, with Azure services growing 39% [7] Segment Performance - Productivity and Business Processes contributed $34.1 billion, up 16%, driven by Microsoft 365 [8] - More Personal Computing saw a 3% decline to $14.3 billion due to weaker gaming and devices [8] Market Reaction and Future Outlook - Despite strong earnings, Microsoft shares fell approximately 12% in early trading, attributed to concerns over high capital expenditures and potential margin pressures [9] - The results indicate sustained leadership in cloud and AI, with strong visibility from commercial performance obligations [10] - The post-earnings pullback may present a buying opportunity if AI adoption continues, reinforcing Microsoft's position in technology portfolios [11] - Azure's AI momentum remains a key growth driver for Microsoft, despite significant upfront investments [12]