Why Microsoft's Stock Plunged to a 15-Month Low: A Deep Dive

Microsoft’s stock (NASDAQ: MSFT) plummeted to a 15-month low of $375.39 on April 1, 2025, and continued its decline in the following weeks, reaching $367 by late April. The selloff was driven by a perfect storm of competitive pressures, regulatory risks, macroeconomic headwinds, and technical breakdowns. Here’s what investors need to know.

1. Cloud Growth Stalls as Rivals Gain Ground

Microsoft’s Azure cloud platform, a cornerstone of its $250 billion annual revenue stream, reported 31% year-over-year revenue growth in Q2 FY2025. While robust on its own, this missed Wall Street’s 31.8% expectation and marked a deceleration from Azure’s 33% growth in the prior quarter.

• Amazon’s AWS, with a 30% cloud market share, grew at 18% in Q1 2025, leveraging its scale and early-mover advantage.
• Google Cloud surged 34%, fueled by aggressive pricing and AI tools like Vertex AI, which undercut Azure’s OpenAI-powered offerings.

Analysts worry Microsoft’s $87 billion 2025 capital expenditure—a 55% year-over-year jump—may be over-investing in AI and data centers without immediate returns. Azure’s AI revenue run rate of $10 billion is still seen as a long-term bet, leaving investors impatient for near-term payoff.

2. Regulatory Scrutiny and Legal Risks

Microsoft faces two major regulatory battles:
1. U.S. FTC Investigation: The FTC is probing Microsoft’s cybersecurity contracts with U.S. government agencies, alleging antitrust concerns over “customer lock-in” practices.
2. Activision Blizzard Acquisition: Despite closing in 2023, the $69 billion deal remains under scrutiny in multiple jurisdictions. While the UK cleared Microsoft’s partnership with OpenAI, other regulators could delay AI expansion plans tied to Azure.

Legal headwinds threaten to divert resources from growth initiatives and could lead to fines or forced divestitures, further depressing investor sentiment.

3. Tariffs and Supply Chain Pressures

President Trump’s 25% tariff on non-U.S.-made cars, effective April 2, 2025, indirectly impacted Microsoft by raising costs for imported semiconductor components. While Microsoft doesn’t manufacture cars, its reliance on global supply chains—especially Chinese-manufactured parts—exposed it to trade tensions.

Analysts estimate tariffs could reduce profitability by 2-3 percentage points if expanded beyond autos. Microsoft’s $1 billion Ohio data center project was even shelved, with CEO Satya Nadella citing a “strategic pause” to prioritize returns over rapid expansion.

4. Broader Market Weakness and Technical Sell-Off

The tech sector faced a brutal correction in early 2025:
- The S&P 500 fell 4.6% in Q1, while the Nasdaq dropped nearly 9%, marking its lowest level since September 杧24.
- Microsoft’s stock broke below critical support zones ($385–$390) and year-to-date lows, signaling a bearish trend.

Technical indicators suggest further downside to $338.85 (September 2023 lows), though a rebound above $400 could invalidate the bearish narrative.

Analysts Remain Split: Bulls vs. Bears

• Bulls:
• Piper Sandler ($520 target): Highlights Azure’s $10 billion AI revenue run rate and Microsoft’s $100 billion annual cash flows as long-term strengths.

• Morgan Stanley ($500 target): Points to steady growth in Office 365 and Teams, which contribute 43% of total revenue.

• Bears:

• Stifel ($475 target): Warns Azure’s capex overhang and slower AI monetization could prolong the slump.

The consensus average target is $510, implying a 29% upside from April lows, but near-term volatility remains high.

Conclusion: Short-Term Pain, Long-Term Potential

Microsoft’s stock decline reflects valid concerns: Azure’s growth slowdown, regulatory risks, and macroeconomic uncertainty. However, its $12 billion quarterly net income, 45% operating margin, and $72 billion cash reserves provide a strong financial foundation.

The path to recovery hinges on:
1. Azure’s ability to accelerate growth (targeting 35%+ growth in 2026).
2. Regulatory clarity on FTC investigations and the Activision deal.
3. Technical rebound above $400, which could signal renewed investor confidence.

While risks remain, Microsoft’s dominance in enterprise cloud and AI—paired with its cash flow resilience—supports the $510 consensus target. For now, investors should monitor Azure’s Q3 2025 results (due April 30) and regulatory updates closely.

In short: Microsoft is a long-term buy, but the near-term journey may remain bumpy.