Microsoft shares dropped 4.5% on the Frankfurt market on Thursday after the company issued a downbeat forecast for its cloud business. In contrast, Meta shares rose 2.5% in Germany following a quarterly earnings beat, as investors scrutinized the companies’ spending on artificial intelligence.
Microsoft’s shares had already fallen approximately 4.5% during after-hours trading on Wednesday, wrapping up the regular session with a 1.1% decline. Meanwhile, Meta shares increased by 2.1% after the closing bell and finished the regular session up 0.3%.
The stock movements came shortly after the Chinese AI startup DeepSeek announced a breakthrough in affordable AI computing technology. This development raised concerns within the U.S. technology sector, prompting the chief executives of Microsoft and Meta to defend their significant investments in AI to remain competitive.
Analysts’ perspective on Microsoft
Analysts anticipate Microsoft’s fiscal second-quarter earnings report, scheduled for release after market close on Wednesday. Many analysts have maintained a positive outlook ahead of the results, despite a shift in investor sentiment.
According to Morgan Stanley analysts, “Investor sentiment has shifted negative as a ‘wall of worry’ around gross margins, capex, GenAI monetization and the OpenAI relationship builds.” They noted that Microsoft has underperformed compared to other major software companies over the past three months.
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The firm adjusted its price target for Microsoft to $540 from $548 but suggested that Microsoft’s position in generative artificial intelligence, along with recent market trends, could create “an attractive entry point.” They highlighted that the recent advances by DeepSeek, which impacted numerous AI stocks, could potentially benefit Microsoft, particularly its Azure platform, through the proliferation of AI models and consumer applications.
Of the 19 analysts tracked by Visible Alpha, 18 rated Microsoft as a “buy” or equivalent, while only 1 provided a “hold” rating. The consensus price target stands at just over $517, representing nearly a 17% premium to the intraday price of approximately $442 on Wednesday.
Wall Street expectations for Microsoft’s upcoming earnings include revenue of $68.89 billion, reflecting an 11% year-over-year increase, alongside earnings of $23.26 billion, or $3.12 per share, up from $21.87 billion, or $2.93 per share a year ago. Furthermore, revenue from its Intelligent Cloud segment, which encompasses the Azure cloud computing platform, is projected to rise 20% to $25.76 billion.
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