By Adam Hejl
Publication Date: 2026-05-02 05:24:00
What Happened?
Shares of technology giant Microsoft (NASDAQ:MSFT) fell 4% in the afternoon session after investors reacted to its massive spending on artificial intelligence, which overshadowed an otherwise strong first-quarter earnings report.
The company reported revenue of $82.89 billion and earnings per share of $4.27, beating Wall Street expectations. However, the positive results were secondary to concerns about the cost of its AI ambitions. The company’s heavy investment cycle appeared to weigh on its cash generation, as its free cash flow margin fell to 19.1% for the quarter, a significant drop from 29% in the same period last year.
Additionally, while the company’s key Azure cloud platform saw its growth accelerate, the company’s overall gross margin edged down year-over-year. This has investors questioning the near-term profitability and return on these substantial AI investments.
The shares closed the day at $408.22, down 4.1% from previous close.
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