Microsoft is being sued by shareholders who say it deceived them and inflated 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 shares suffered their biggest single-day decline in nearly six years.
Microsoft said Monday that it believes the allegations are “baseless,” adding: “Microsoft stands by the integrity of its public statements and will vigorously defend itself in court.”
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 expectations but down from 40% in the previous quarter and expected to grow between 37% and 38% in the first three months of 2026.
Microsoft also reported second-quarter capital spending of US$37.5 billion, an increase of nearly 66% year-over-year and higher than analysts’ expectations of US$34.3 billion.
According to the complaint, Microsoft blames Azure’s slower growth and increased spending on capacity constraints as it redirects resources to AI-related research and development and to rival Copilot chatbots such as Google’s Gemini and OpenAI’s ChatGPT.
