Microsoft shareholders sued the company on Friday (June 12), accusing it of deceiving shareholders and inflating its stock price by concealing slowing growth in its Azure cloud business and the need to invest billions of dollars in artificial intelligence infrastructure, Reuters reported on Monday (June 15).
The lawsuit was triggered by a 10% drop in Microsoft stock on Jan. 29, the day after Microsoft announced in its quarterly earnings report that revenue growth for Azure and other cloud businesses slowed to 39% from 40% in the previous quarter, and capital spending rose nearly 66% year over year, according to the report.
According to the report, Microsoft attributed these results to capacity constraints the company faced as it shifted resources to AI-related research and development and the Copilot chatbot.
The lawsuit is being led by Michigan-based St. Clair Shores Police and Fire Retirement System, the report said.
Microsoft did not immediately respond to PYMNTS’ request for comment.
PYMNTS reported on January 28 that after that day’s earnings release, Microsoft’s stock price fell to mid-single digits in after-hours trading due to concerns over AI-driven capital spending.
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During the conference call, Microsoft executives suggested that the company’s latest transformation story revolves around AI.
“We are in the early stages of AI adoption, but Microsoft has already built an AI business that is larger than some of our largest franchises,” Microsoft Chairman and CEO Satya Nadella said on a conference call. “We are pushing the frontiers of the entire AI stack to bring new value to our customers and partners.”
In response to investor questions about capital spending, executives said on a conference call that Microsoft is looking to build a complete AI stack, going beyond renting GPUs to bundling model access, orchestration tools, security and governance into a single enterprise-ready environment.
In a separate lawsuit, Oracle was sued by bondholders in January for false and misleading statements in offering documents for an $18 billion debt sale for AI infrastructure.
The lawsuit alleges that investors who bought $18 billion in bonds and bonds issued by Oracle in September suffered losses due to perceived increased credit risk when the company announced seven weeks later that it was seeking a $38 billion loan to fund data centers.
