New York, February 1, 2026, 09:42 ET — The market has closed, reflecting a tumultuous week for tech stocks, particularly Microsoft. Shares of the software giant ended the session at $430.29, a decline of 0.7%, following a staggering 10% fall on Thursday. This drop has sent ripples through the market, intensifying scrutiny on upcoming earnings reports from major companies. “The onus is going to be on them to deliver,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
As investors brace for a heavy schedule of U.S. economic data this week, including Friday’s January payrolls report, the outlook remains uncertain. There are concerns that some reports could be delayed due to a partial government shutdown that began early Saturday, as funding for certain agencies expired. “The calendar could shift,” cautioned Kiplinger.
Microsoft’s latest quarterly results initially appeared robust: revenue surged 17% to $81.3 billion for the quarter ending December 31. The company’s cloud segment saw particularly strong growth, with Microsoft Cloud revenue climbing 26% to $51.5 billion, buoyed by a 39% increase in Azure and other cloud services. CEO Satya Nadella emphasized the ongoing potential in artificial intelligence (AI), noting, “We are only at the beginning phases of AI diffusion.”
However, the report also highlighted a concerning increase in capital expenditures, which reached $37.5 billion, marking a nearly 66% year-over-year rise. This figure unsettled traders, raising questions about future profitability as costs continue to climb. Chief Financial Officer Amy Hood suggested that capital expenditures would be “slightly lower than in the just-completed quarter,” but she warned that rising memory-chip costs could pressure cloud margins over time. Portfolio manager Eric Clark noted that costs are climbing faster than revenue.
In a significant development for Microsoft, AI startup Perplexity secured a $750 million deal with the company for Azure services over the next three years. A Microsoft spokesperson affirmed that “Perplexity has chosen Microsoft Foundry as its primary AI platform for model sourcing.” This deal reflects a growing demand for Microsoft’s cloud capabilities but also underscores the potential risks associated with heavy investments in AI infrastructure.
The broader implications of Microsoft’s stock decline have raised alarms about the costs associated with AI investments potentially outpacing their benefits. The company’s stock plummet has erased nearly $360 billion in market value, leading analysts to express concerns about dependence on partners like OpenAI. Jefferies analyst Brent Thill remarked that the backlog details “underscored worries” about concentration risks linked to their partnerships.
As the market digests these developments, the upcoming week will be pivotal. Major companies are set to announce earnings, including Walt Disney on Monday, Advanced Micro Devices on Tuesday, Alphabet on Wednesday, and Amazon concluding the week on Thursday. The U.S. jobs report, due on Friday at 8:30 a.m. ET, is expected to play a critical role in shaping rate expectations and influencing valuations across the tech sector.
With the market still reeling from Microsoft’s missteps, all eyes will be on these earnings reports to gauge the health of the technology sector. Investors are keenly aware that the performance of these tech giants could either stabilize or further destabilize market sentiments as they navigate the complexities of a challenging economic landscape.
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