June 15: Microsoft is sued by shareholders for deceiving them and inflating its stock price by failing to disclose slowing growth in its Azure cloud business and the need to spend billions of dollars on AI infrastructure.
A proposed class action lawsuit led by a Michigan pension fund was filed Friday in Seattle federal court after Microsoft’s stock fell 10% on Jan. 29 following the previous day’s quarterly earnings report.
About $357 billion in market capitalization was wiped out, and Microsoft stock suffered its biggest single-day drop in nearly six years.
Microsoft did not immediately respond to a request for comment on Monday.
• Microsoft reported a 39% increase in revenue from its Azure and other cloud businesses for the fiscal second quarter ending in December, in line with analyst forecasts but down from 40% in the previous quarter and expected to grow 37% to 38% in the first three months of 2026.
• Microsoft also reported second quarter capital spending of $37.5 billion. That was up nearly 66% year-over-year and beat analysts’ expectations of $34.3 billion.
• According to the lawsuit, Microsoft blames Azure’s slower growth and increased spending on capacity constraints as it diverts resources to AI-related research and development and Copilot chatbots, which are rivals such as Google’s Gemini and OpenAI’s ChatGPT.
• Redmond, Washington-based Microsoft is a major investor in OpenAI.
• This lawsuit is being led by the St. Clair Shores Police and Fire Retirement System in Michigan.
• Defendants include multiple Microsoft officials, including CEO Satya Nadella and Chief Financial Officer Amy Hood.
• The proposed class period is from May 1, 2025 to January 28, 2026.
• It is common for shareholders to sue companies for securities fraud after stock prices decline unexpectedly.
