Microsoft lost $357 billion in market cap as stock plunged most since 2020

Microsoft shares slid about 10% on Thursday following an earnings report that disappointed some investors, prompting the stock’s Sharpest daily decline since March 2020.

The move trimmed the technology company’s market cap by $357 billion, leaving it at $3.22 trillion by the end of Thursday trading.

The iShares Expanded Tech-Software Sector exchange-traded fund tumbled 5% on Thursday, while the technology-heavy Nasdaq Composite index finished the day down 0.7%. Not all of technology went down, though.

Meta shares spiked 10% after impressing analysts with robust results and quarterly revenue guidance on Wednesday.

Investors found a few imperfections in Microsoft’s report.

The all-important growth statistic for Azure and other cloud services came in at 39%, below StreetAccount’s 39.4% consensus. The company called for about $12.6 billion in fiscal third-quarter revenue from the More Personal Computing segment that includes Windows, lower than StreetAccount’s $13.7 billion consensus, and the implied operating margin for the new quarter also came up short.

Microsoft’s finance chief, Amy Hood, argued that the cloud result could have been higher if it had allocated more data center infrastructure to customers Rather than prioritizing its in-house needs.

“If I had taken the GPUs that just came online in Q1 and Q2 in terms of GPUs and allocated them all to Azure, the KPI would have been over 40,” she said.

Analyst Ben Reitzes of Melius Research, with a buy rating on Microsoft stock, said during CNBC’s “Squawk on the Street” on Thursday that Microsoft should double down on data center construction.

“I think that there’s an execution issue here with Azure, where they need to literally stand up buildings a little faster,” he said.

Analysts at UBS led by Karl Keirstead questioned Microsoft’s choice to secure artificial intelligence computing capacity for products such as the Microsoft 365 Copilot productivity software add-on that has yet to succeed as much as OpenAI’s ChatGPT.

“M365 revs growth is not accelerating due to Copilot, many checks on Copilot don’t suggest a strong usage ramp (we plan to refresh our own checks in case we’ve missed a usage ramp) and the model market appears crowded and capital-intensive,” the UBS analysts wrote. “We think Microsoft needs to ‘prove’ that these are good investments.”

The negativity wasn’t universal across Wall Street. Bernstein analysts led by Mark Moerdler, with the equivalent of a buy rating on Microsoft shares, applauded Microsoft’s decision-making.

“Investors need, we believe, to understand that management made a cognizant decision to focus on what is best for the company long term rather than driving the stock up this quarter or even over last quarter and a few quarters to come (as capacity constraints likely abate),” the analysts wrote in a Thursday note.

Hood called for capital expenditures to decline slightly in the current quarter.

WATCH: ‘AI is eating software’, says Melius’ Ben Reitzes