Microsoft shares fell about 5% on Wednesday, while the broader tech market recovered, after UBS analysts suggested the software company is vulnerable, particularly in the cloud. Analyst Karl Keirstead downgraded Microsoft to neutral from buy, stating that the bank’s confidence in the company has been eroded by the latest round of field investigations of the business. Concerns have been raised about Azure, Microsoft’s cloud computing technology, and Office 365, the company’s suite of productivity software.
According to the analyst, Office 365, which has been a “remarkably steady machine of late,” could have slower revenue growth in 2023, while Azure is undergoing a “sharp growth deceleration” that could be worse than investors predict in 2023 and 2024. Microsoft provides year-over-year growth for Azure and other cloud services but does not disclose a dollar amount or identify how much of the growth is attributed to Azure alone. The Azure and other cloud services section also contains tools for enterprise mobility and security, or EMS, which can be purchased individually.
Google estimated Microsoft’s Azure business based on a leaked Microsoft document and some extrapolation of other market data. According to the Google research, Azure would complete the fiscal year 2022 with an operating loss of over $3 billion, down from a loss of more than $5 billion the previous year.Other tech stocks jumped on Wednesday, with Apple, Tesla, and Meta up between 2% and 4%. The Nasdaq rose by more than 1%.