Microsoft stock (MSFT) posts record profits but still lost $175B in one-day sell-off

Microsoft (MSFT) stock took a wild ride on the Halloween week.

After delivering record profits, the stock went into the steepest tailspin in years led by the company’s unsettling guidance.

The tech giant posted earnings of $3.30 per share on $65.6 billion in revenue for the September quarter, easily topping forecasts. Cloud revenue for Azure surged 34%, well above expectations.

But by October 31, MSFT stock had shed $175 billion in market cap, plunging as much as 6.1% during the session.

For perspective, that one-day drop was greater than Walt Disney Co.'s (DIS) entire market cap—a Dow 30 heavyweight, no less.

Microsoft’s decline pulled down the Nasdaq Composite, which fell 2.8%, with both the Dow Jones Industrial Average and S&P 500 Index also ending lower.

Microsoft made a modest comeback to close the week up 1% at $410.37.

The sell-off stemmed from investor jitters over Microsoft’s outlook, as management warned of slowing growth in its cloud and AI segments.

Azure’s impressive growth is forecasted to cool off in Q4, along with the AI-focused Intelligent Cloud division.

Adding to the caution, OpenAI—Microsoft’s 49%-owned generative AI powerhouse—is expected to post losses in the last quarter.

Microsoft’s stake comes from a $13.75 billion investment in OpenAI over the past five years.

Even with strong fundamentals, MSFT’s performance reflects a tech world fixated on future earnings potential over today’s results.

According to Bloomberg Intelligence, investors are eyeing a potential $1.3 trillion AI market by 2032, and they’re eager to see if Microsoft can carve out a major share.

The bears are “splitting hairs”

Microsoft’s post-earnings dip looks like just a blip as the software titan deepens its push into AI.

Wedbush analyst Daniel Ives echoed confidence in Microsoft’s AI strategy, saying the latest earnings report only strengthens his bullish outlook.

“The bears will try to nitpick any detail, but this is a tech powerhouse in full growth mode. We see no signs of slowing down based on our checks, and these strong results reinforce our bullish thesis” Ives noted.

S&P Global Market Intelligence analysts share this sentiment, assigning MSFT a price target of nearly $502.

"This target implies more than 20% upside, positioning Microsoft to challenge Nvidia (NVDA) and Apple (AAPL) for the title of the world's most valuable company."

Evercore ISI also brushed aside AI-related concerns, standing by its $500 price target.

The firm expects Microsoft’s ramped-up capital expenditures on AI data centers to yield results in fiscal 2025 as adoption accelerates.