Why Microsoft Stock Is Sinking Today

Microsoft (NASDAQ: MSFT) stock is slipping in Thursday's trading following the company's recent quarterly report. The tech giant's share price was down 5.4% as of 3 p.m. ET.

After the market closed yesterday, Microsoft reported results for the fist quarter of its current fiscal year -- which ended Sept. 30. While sales and earnings for the period came in ahead of Wall Street's expectations, investors aren't satisfied with the company's forward guidance.

Microsoft posts strong growth in fiscal Q1

Microsoft posted earnings per share of $3.30 on revenue of $65.59 billion, beating the average analyst estimate's call for per-share earnings of $3.11 on revenue of $64.56 billion. The company's revenue was up roughly 16% year over year in the period, and earnings per share were up 10% compared to last year's quarter. The business posted operating income of $30.6 billion in the period -- good for a margin of roughly 46.7% and up 14% compared to Q1 last year.

Microsoft's Intelligent Cloud business was once again the standout growth driver. Segment sales increased 20% year over year to reach $24.1 billion, Within the segment, sales for the Azure cloud infrastructure business rose 34%.

Meanwhile, sales for the productivity and business processes segment came in at $28.3 billion, up 12% year over year. Revenue for the personal computing segment rose 17% year over year to reach $13.2 billion. Overall, it was a very strong quarter for the company, but management's forward guidance doesn't appear to have lived up to Wall Street's lofty expectations.

But Wall Street wasn't satisfied with Microsoft's cloud and AI guidance

For the current quarter, Microsoft expects growth for the Azure business to come in between 31% and 32% -- decelerating from the 34% growth rate it posted last quarter. Overall revenue for the Intelligent Cloud segment is expected to be up between 18% and 20% year over year.

The company expects artificial intelligence (AI) sales to be roughly in line with performance last quarter, and it looks like investors were hoping for meaningful sequential growth. Along with rising spending on AI infrastructure, the guidance shortfall is causing Microsoft stock to lose ground today. On the other hand, management said that it expects Azure's growth to accelerate in the second half of the fiscal year. For long-term investors looking to build exposure to AI trends, today's pullback could present a worthwhile buying opportunity.

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