Microsoft shares fell about 10% following an earnings report that fell short of some investor expectations, marking the stock’s biggest daily drop since March 2020 and cutting its market cap by $357 billion to $3.22 trillion.

Azure and cloud services growth came in at 39%, slightly below consensus, while revenue guidance for the More Personal Computing segment, including Windows, was lower than expected, along with implied operating margins.

CFO Amy Hood explained that cloud growth could have been higher if more data center capacity had been allocated to customers rather than internal needs, highlighting ongoing capacity constraints.

Analysts raised concerns about Microsoft’s AI investments, particularly M365 Copilot, noting slower adoption and heavy capital demands, while some praised the company for prioritizing long-term strategy over short-term stock gains, CNBC has reported.

Capital expenditures are expected to decline slightly in the current quarter as Microsoft continues managing infrastructure and AI resource allocation.