Microsoft Stock Drops 10% Despite Beat, $357B Market Cap Wiped Amid AI Spending Concerns

Microsoft shares plunged 9.99% on January 29, 2026 — its steepest single-day drop since 2020 — erasing $357 billion in market value after reporting strong but costly AI-driven growth. Q2 revenue hit $81.3B (+17% YoY) and non-GAAP EPS reached $4.14 (+24%), beating estimates of $80.3B and $3.91. Azure grew 39%, matching forecasts. Yet investors sold off on elevated capex of $37.5B, questioning ROI timelines for AI infrastructure. After-hours trading saw initial 7% slide, deepening to 10% by close. The selloff dragged Nasdaq down 0.7%. CEO Satya Nadella insists AI adoption is early-stage, calling Microsoft’s AI business “larger than some of our biggest franchises.”