LOS ANGELES--(BUSINESS WIRE)--Microsoft Corporation Investigated on Behalf of Investors - Contact the DJS Law Group to Discuss Your Rights – MSFT. ...

Group 1: Federal Reserve Chair Nomination - The Trump administration is preparing to nominate Kevin Warsh as the new chair of the Federal Reserve, succeeding Jerome Powell whose term ends in May [3][4] - Warsh is considered a relatively hawkish choice for the position, which may influence future monetary policy [4] Group 2: GrubHub's Competitive Strategy - GrubHub is removing service and delivery fees on restaurant orders over $50, aiming to attract customers from competitors like DoorDash and Uber Eats [5][6] - The new policy is set to launch more broadly on February 2, with the goal of reducing "checkout abandonment" for large orders [5] Group 3: Apple Financial Performance - Apple reported a 15.7% increase in revenue for Q1 fiscal 2026, totaling $143.76 billion, surpassing the estimate of $138.52 billion [7] - Earnings per share were $2.84, exceeding the consensus estimate of $2.67, driven by a 23% surge in iPhone revenue [7][8] - CEO Tim Cook highlighted unprecedented demand for iPhones, with all-time records across geographic segments, and a 14% increase in Services revenue [8]

Core Viewpoint - Microsoft experienced a significant stock decline of nearly 10% in a single day, resulting in a market capitalization drop of approximately $360 billion, despite reporting strong earnings shortly before the decline [1][2][4]. Financial Performance - Microsoft reported an adjusted earnings per share (EPS) of $4.14, exceeding the expected $3.97, and revenue of $81.27 billion, surpassing the forecast of $80.27 billion [4]. - The company's cloud services, including Azure, grew by 39%, aligning with expectations [5]. Investor Sentiment - Despite strong earnings, investor sentiment was negatively impacted by a lower-than-expected implied fiscal third-quarter operating margin of 45.1% and a gross margin that fell to a three-year low of 68% [7]. - A notable 9.5% drop in gaming revenue contributed to investor unease, alongside concerns that 45% of Microsoft's backlog is tied to OpenAI, raising fears about dependency on a single entity [8][10]. Market Dynamics - The discussion surrounding OpenAI has intensified, with concerns about its financial sustainability and the potential for an AI bubble, leading to increased selling pressure on Microsoft shares [9][10]. - Microsoft's aggressive integration of its Copilot AI into software has led to a perception of diminishing goodwill among users, with some referring to the company as "Microslop" [11][13].

Core Viewpoint - Microsoft's Cloud business is experiencing significant growth, contributing to the company's ability to exceed consensus estimates for both revenue and earnings by substantial margins [1]. Group 1: Financial Performance - Microsoft achieved double-digit growth in its top-line revenue, indicating strong demand and performance in its Cloud segment [1].

Investment Rating - The report maintains a BUY rating for Microsoft, indicating a potential return of over 15% over the next 12 months [19]. Core Insights - Microsoft reported 2QFY26 results with revenue of US$81.3 billion, reflecting a 16.7% year-over-year growth, which is 1.5% better than both the forecast and Bloomberg consensus estimates [1]. - Operating income increased by 20.9% year-over-year to US$38.3 billion, exceeding forecasts, driven by strong performance in the Productivity and Business Processes (PBP) and Intelligent Cloud (IC) segments [1]. - The target price has been revised down by 3% to US$614.6, translating into a price-to-earnings ratio of 35x for FY26E and 31x for FY27E [1][2]. Financial Performance - Revenue growth in the Intelligent Cloud segment was 28.8% year-over-year, contributing US$32.9 billion, which accounted for 40.5% of total revenue [7]. - Azure and other cloud services revenue grew by 39% year-over-year, aligning with consensus expectations [7]. - The Productivity and Business Processes segment generated US$34.1 billion in revenue, up 15.9% year-over-year, representing 42.0% of total revenue [7]. Capital Expenditure and Outlook - Capital expenditures, including financial leases, reached US$37.5 billion for 2QFY26, up 66% year-over-year, with a significant portion allocated to short-lived assets like GPUs and CPUs [7]. - Management anticipates a decrease in capital expenditures in 3QFY26 due to normal variability in cloud infrastructure buildouts [7]. Earnings Summary - For FY26E, revenue is projected at US$327.7 billion, with a year-over-year growth of 16.3% [8]. - Net profit is expected to reach US$129.5 billion, reflecting a 27.1% year-over-year increase [8]. - The earnings per share (EPS) for FY26E is estimated at US$17.41, with a P/E ratio of 27.7x [8]. Share Performance and Market Data - The current market capitalization of Microsoft is approximately US$3.59 trillion, with an average turnover of US$12.08 billion over the last three months [3]. - The stock has a 52-week high of US$542.07 and a low of US$354.56 [3].

Market Analysis by covering: Gold Spot US Dollar, S&P 500, Microsoft Corporation, US Dollar Index Futures. Read 's Market Analysis on Investing.com ...

Market Sentiment - The CNN Money Fear and Greed index showed a decline in overall market sentiment, remaining in the "Greed" zone with a current reading of 61.7, down from 64 [1][5]. Stock Performance - U.S. stocks settled mixed, with the Nasdaq Composite falling more than 150 points during the session. The Dow Jones closed higher by around 56 points to 49,071.56, while the S&P 500 fell 0.13% to 6,969.01 and the Nasdaq Composite dipped 0.72% to 23,685.12 [1][4]. - Microsoft Corp. shares fell almost 10%, marking its worst session since March 2020, due to reported slowing cloud growth [2]. - ServiceNow Inc. shares tumbled 10% despite reporting upbeat earnings and revenue for the fourth quarter [2]. Economic Data - U.S. initial jobless claims fell by 1,000 to 209,000, compared to market estimates of 205,000 [3]. - The trade deficit rose sharply to $56.8 billion in November from a $29.2 billion gap in the previous month [3]. - U.S. wholesale inventories increased by 0.2% to $915 billion in November, maintaining the same pace as the previous month [3]. - U.S. factory orders climbed by 2.7% from the previous month to $621.6 billion in November [3]. Sector Performance - Most sectors on the S&P 500 closed positively, with real estate, communication services, and financial stocks recording the biggest gains [4]. - Consumer discretionary and information technology stocks closed lower, bucking the overall market trend [4].

Industry Overview - Hyperscalers are projected to spend $500 billion on AI-related capital expenditures in 2026, indicating a strong commitment to AI infrastructure development [1] - AI developers are expected to invest $500 billion in infrastructure this year, highlighting the ongoing growth in the sector [1] Company Analysis: Broadcom - Broadcom is a key player in the AI infrastructure value chain, providing essential networking gear, switches, and interconnects for AI data centers [5][6] - The company is involved in designing custom silicon solutions for major developers like Alphabet, Apple, ByteDance, and Meta, enhancing its role in the AI ecosystem [6] - Broadcom has a market cap of $1.6 trillion, with a gross margin of 64.71% and a dividend yield of 0.73%, making it an attractive investment opportunity as analysts rate it a buy [4][8] Company Analysis: Taiwan Semiconductor Manufacturing (TSMC) - TSMC is the largest chip manufacturer globally, holding an estimated 70% market share, and serves as a critical supplier for companies like Nvidia, AMD, and Broadcom [9] - The company has experienced a renaissance, becoming less vulnerable to cyclical trends in the semiconductor industry, with consistent demand driven by AI [11][13] - TSMC's revenue and profitability are accelerating, with management guiding for further growth as the AI infrastructure movement continues [13][14] - The company has a market cap of $1.8 trillion, a gross margin of 59.02%, and a dividend yield of 0.91%, positioning it as a potentially undervalued stock in the AI sector [10][11]

Market Reactions - The CEO of Indonesia's stock market, Imam Rachman, resigned, leading to a 1.2% gain in Jakarta's benchmark index, which had previously been at all-time highs but fell 7.4% on Wednesday and 1.1% on Thursday due to MSCI's warning about market risks [1][14] - The Hang Seng index in Hong Kong dropped 1.8% to 27,455.13, while the Shanghai Composite index slipped 0.9% to 4,122.61 [1][14] - Tokyo's Nikkei 225 fell 0.1% to 53,322.85, with declines in artificial intelligence-related stocks, including a 4.5% drop for Advantest and a 1.7% drop for Disco Corp [4][14] - South Korea's Kospi edged up 0.1% to 5,224.36 after initial talks with U.S. Commerce Secretary Howard Lutnick did not yield an agreement [4][14] U.S. Stock Market Performance - U.S. stocks experienced modest movements, with the S&P 500 slipping 0.1% after reaching record highs earlier in the day and dropping by as much as 1.5% [5][14] - Microsoft saw a significant decline of 10%, marking its worst day since the COVID crash in 2020, despite reporting stronger-than-expected profits and revenue [5][14] - Tesla's stock fell 3.5%, delivering a profit that exceeded analyst expectations but was lower than the previous year [6][14] Precious Metals and Currency Trends - Gold prices decreased by 2.8% to $5,205 per ounce after briefly reaching near $5,600, having nearly doubled over the last 12 months [7][14] - Silver prices declined 4.1% to nearly $110.41, following a significant upward trend [7][14] - The U.S. dollar traded at 153.85 Japanese yen, up from 152.97 yen, while the euro slipped to $1.1921 from $1.1967 [9][14] Oil Market Dynamics - Oil prices fell after a previous increase of over 3% due to concerns about U.S.-Iran tensions affecting crude flow [10][14] - U.S. benchmark crude oil lost $1.07 to $64.35 per barrel, while Brent crude dropped $1.10 to $68.49 per barrel [11][14]

Summary of Conference Call Notes Industry Overview - **Industry**: Greater China Technology Semiconductors - **Focus**: Cloud and PC Semiconductors - **Key Trends**: AI investments are a primary focus for hyperscalers in 2026, with memory pricing affecting capital expenditure (capex) and the overall PC and enterprise server market. Preference is given to cloud semiconductor companies over PC semiconductor companies [1][3]. Key Company Insights Meta (META.O) - **4Q25CY Capex**: US$22.1 billion, representing a 14% increase quarter-over-quarter (Q/Q) and a 48% increase year-over-year (Y/Y) [7]. - **2026 Capex Guidance**: Expected to be between US$115-135 billion, a 74% increase Y/Y at the mid-point, driven by investments in superintelligence labs and core business infrastructure [7]. - **AI Focus**: Continues to prioritize AI and collaborates with key partners while advancing its silicon program to diversify chip supply and enhance infrastructure flexibility [7]. Microsoft (MSFT.O) - **F2Q26 Capex**: Reported at US$37.5 billion, a 7.4% increase Q/Q and a 66% increase Y/Y, with two-thirds allocated to short-lived assets focusing on GPUs and CPUs [7]. - **Future Capex Expectations**: Anticipates a sequential decrease in capital expenditure due to normal variability from cloud infrastructure buildouts and timing of finance lease deliveries [7]. - **New Products**: Introduced the Maia 200 GPU and Cobalt 200 CPU, aimed at avoiding reliance on a single source for chip supply [7]. - **Impact of Memory Pricing**: Increasing memory prices are expected to affect capex and create volatility in on-premises server business transactions, with a negative outlook for the PC market [7]. Investment Outlook - **Cloud Semiconductor Providers**: Positive sentiment towards cloud semiconductor companies like Aspeed Technology (5274.TWO) due to ongoing investments in 2026 [3]. - **PC Market Caution**: A cautious view on PC semiconductors, particularly in the second half of 2026, due to rising memory prices impacting the market [3]. Valuation Methodology and Risks - **Aspeed Technology (5274.TWO)**: Valuation based on a residual income model with key assumptions including a cost of equity of 9.8%, medium-term growth rate of 18.5%, and terminal growth rate of 5.2% [9]. - **Risks**: Upside risks include stronger cloud demand and faster-than-expected specification migration, while downside risks involve softening cloud demand and intensified competition [9]. Additional Insights - **Industry View**: The overall industry view is considered attractive, indicating potential for growth and investment opportunities [5]. - **Analyst Team**: The report is prepared by a team of analysts including Daniel Yen, Charlie Chan, Daisy Dai, and Tiffany Yeh, who have certified their views on the companies discussed [14]. This summary encapsulates the key points from the conference call, focusing on the semiconductor industry, particularly the cloud and PC segments, and highlights the strategic directions of major players like Meta and Microsoft.