Following a $750 Million Deal with Perplexity, Is Microsoft Stock a Buy, Sell, or Hold?

Microsoft (MSFT) just landed a massive $750 million cloud deal with AI search startup Perplexity, but investors aren’t exactly celebrating, given MSFT stock tanked 10% following the company’s latest earnings report.

According to a Bloomberg report, the Perplexity deal could be a key win for Microsoft’s Azure cloud business. The deal allows the AI search company to deploy models from OpenAI, Anthropic, and xAI through Microsoft’s Foundry service. 

It’s a strategic move that diversifies Perplexity’s cloud infrastructure beyond its primary partner, Amazon Web Services (AMZN). However, Wall Street’s reaction to Microsoft’s earnings tells a different story about investor confidence.

The Earnings Miss that Spooked Investors

Microsoft’s fiscal second-quarter results on Jan. 29 weren’t terrible by any measure. 

• Revenue hit $81.27 billion, beating the $80.27 billion consensus.
• Adjusted earnings per share came in at $4.14, topping expectations of $3.97.
• However, Azure cloud revenue growth of 39% fell short of the 39.4% consensus forecast.
• More concerning, guidance for the More Personal Computing segment—which includes Windows—came in at roughly $12.6 billion, well below the $13.7 billion analysts expected.

The market’s response was swift…