Microsoft Corp (MSFT) shares slipped Wednesday following reports that the tech titan has quietly lowered sales targets for artificial intelligence software. The reason? Customers aren't exactly rushing to buy what Microsoft is selling.
According to a report from The Information, Azure salespeople described the quota cuts as unusual. The company rarely dials back sales expectations for specific products, which makes this move particularly noteworthy. It's the kind of thing that happens when reality doesn't match the hype.
MarketDash reached out to Microsoft investor relations for comment and is awaiting a response.
The Spending Versus Usage Problem
This development captures a growing tension in the AI world: companies are pouring billions into infrastructure while actual customer adoption lags behind. It's one thing to build it. Getting people to come is apparently another story.
The timing is interesting because CEO Satya Nadella has been making the rounds with some pointed commentary about AI's future. He recently called the idea of fully autonomous AI companies "far-fetched," arguing that humans need to remain at the center of operations to build and maintain critical systems.
Nadella's vision involves what he calls "macro delegation," where employees assign broad tasks to AI agents and manage them through a new type of interface. Productivity will surge, he believes, but human agency will still drive the technology forward.
Energy Costs and Social Permission
Nadella also issued a warning that the AI sector is straining electrical grids and must earn its "social permission" to consume massive amounts of energy. The industry needs to prove it's generating broad economic value rather than just enriching a handful of tech giants, he said. Without that proof, the sector risks traveling down a "road to nowhere" if returns stay concentrated at the top. He remains optimistic about the long-term trajectory, but the concerns are real.
Strong Numbers, Muted Response
The disconnect becomes even more apparent when you look at Microsoft's recent financial performance. The $3.6 trillion company has gained over 13% year-to-date, though it's trailing the NASDAQ Composite Index's 21% return.
The company crushed Wall Street expectations in its first quarter, delivering $77.7 billion in revenue—an 18% jump—and earnings of $4.13 per share. Azure revenue surged 40% and total cloud revenue hit $49.1 billion. Nadella credited aggressive investments in AI and cloud infrastructure for fueling the growth.
Yet despite those impressive numbers, the stock dropped 3% in after-hours trading as investors waited for forward-looking guidance. The company had just spent nearly $35 billion on capital expenditures in that quarter alone, which explains some of the caution.
For the second quarter, Microsoft expects revenue between $79.50 billion and $80.60 billion, compared to the analyst consensus of $80.27 billion.
Price Action: MSFT stock traded 2.66% lower at $477.22 at last check Wednesday.