Microsoft Stock Slumps as Azure 'Execution Issues' Make Analysts Wary

Microsoft (MSFT) shares tumbled Thursday after the company’s weaker-than-expected fiscal second-quarter cloud growth prompted some analysts to lower their price targets for the Magnificent Seven stock. UBS maintained a “buy” rating but lowered its price target to $510 from $525, pinning the blame on Microsoft Azure, the tech giant's cloud computing platform. The company's projected current-quarter Azure growth was lower than hoped for, UBS analysts said. "The near-term debate will be dominated by the 'what is going on with Azure?' question," they wrote, with its growth “far worse than we expected." Microsoft blamed the Azure disappointment on "execution issues" in the non-artificial intelligence segments of the segment, according to a conference call transcript provided by AlphaSense.

All but one of the 19 brokers with ratings tracked by Visible Alpha have a “buy” or equivalent rating on Microsoft's shares. Their consensus price target is about $516, a roughly 24% premium to Thursday's close, which followed a 6% daily drop. Some analysts noted signs of AI optimism, including the news that Microsoft’s Azure AI Foundry—which customers can use to build custom AI apps—has reached more than 200,000 monthly users after two months. Bank of America called Microsoft a “top pick," maintaining its $510 price target. The bank revised its 2025 earnings per share estimate upward, calling Microsoft “an AI winner in both apps and infrastructure.” Morgan Stanley trimmed its price target to $530 from $540 and reiterated an "overweight" rating.



Microsoft's stock slump can be attributed to several "execution issues" in Azure's non-AI segments. These issues are contributing to the company's weaker-than-expected cloud growth and investor uncertainty. To address these issues and restore investor confidence, Microsoft can take the following steps:

1. Improve Azure's execution in non-AI segments: Microsoft has acknowledged that there are execution issues in Azure's non-AI segments. To address this, the company should focus on enhancing the performance and reliability of these segments. This could involve optimizing resource allocation, improving service quality, and ensuring consistent growth in these areas.
2. Provide clear communication and guidance: Microsoft should communicate more effectively with investors and analysts about the challenges it is facing in Azure's non-AI segments. By providing clear guidance on the company's plans to address these issues, Microsoft can help alleviate investor concerns and restore confidence in the stock.
3. Demonstrate progress in AI and cloud growth: While addressing the execution issues in Azure's non-AI segments, Microsoft should also emphasize the progress it is making in AI and cloud growth. The company has seen strong demand for its AI services and has expanded its offerings, such as the Azure AI Foundry. By highlighting these successes, Microsoft can show investors that it is still a strong player in the AI and cloud market.
4. Maintain a balanced approach to AI investments: Microsoft has been investing heavily in AI, with plans to spend $80 billion on AI infrastructure this fiscal year. While these investments are crucial for long-term growth, the company should also ensure that it is optimizing costs and maintaining a balanced approach to AI spending. This will help address investor skepticism about the company's escalating AI investments.
5. Address competition and market concerns: Microsoft should also address investor concerns about competition in the AI and cloud market. By demonstrating its competitive advantages and highlighting its unique offerings, such as the integration of DeepSeek's R1 model into Azure AI Foundry, Microsoft can reassure investors that it is well-positioned to compete in the market.



In conclusion, Microsoft's stock slump can be attributed to "execution issues" in Azure's non-AI segments. To address these issues and restore investor confidence, Microsoft should improve Azure's execution, provide clear communication and guidance, demonstrate progress in AI and cloud growth, maintain a balanced approach to AI investments, and address competition and market concerns. By taking these steps, Microsoft can work to address the execution issues in Azure's non-AI segments, restore investor confidence, and maintain its position as a leading player in the AI and cloud market.