Microsoft Q2 Earnings Beat Estimates, But Stock Plunges on AI Spend Concerns

Cloud revenue tops $50 billion for the first time, but investors worry about slowing growth and rising AI costs.

Jan. 29, 2026 at 10:15am

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Microsoft reported strong second-quarter earnings, with cloud revenue exceeding $50 billion for the first time. However, the company's stock fell over 11% as investors expressed concerns about slowing cloud growth and Microsoft's ballooning AI-related spending.

Why it matters

Microsoft is one of the biggest beneficiaries of the AI boom, thanks to its early investments in OpenAI, the developer of ChatGPT. But the company's massive AI-fueled spending has raised concerns among investors about the long-term profitability of the AI industry.

The details

Microsoft reported earnings per share of $5.16 on revenue of $81.27 billion, topping Wall Street estimates. Cloud revenue came in at $51.5 billion, just ahead of expectations. However, investors were worried about the company's rising AI-related capital expenditures, which hit $37.5 billion in the quarter, up from $22.6 billion a year earlier.

  • Microsoft reported its second-quarter earnings after the bell on Wednesday, January 29, 2026.
  • Microsoft's stock fell over 11% on Thursday, January 30, 2026, as investors reacted to the earnings report.

The players

Satya Nadella

CEO of Microsoft.

OpenAI

The developer of ChatGPT, in which Microsoft has made early investments.

Rishi Jaluria

Managing director at RBC Capital Markets.

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What they’re saying

“We are only at the beginning phases of AI diffusion, and already Microsoft has built an AI business that is larger than some of our biggest franchises.”

— Satya Nadella, CEO (Microsoft)

“Maybe it wasn't high enough for people who wanted a higher number.”

— Rishi Jaluria, Managing Director (RBC Capital Markets)

What’s next

Investors will be closely watching Microsoft's future AI-related spending and its impact on the company's overall profitability.

The takeaway

Microsoft's strong cloud revenue growth and early AI investments have made it a leader in the AI industry, but the company's ballooning AI-related costs have raised concerns among investors about the long-term viability of the AI business model.