Microsoft sued by shareholders over expenses, cloud business, AI

Microsoft has been sued by shareholders who accused the company of defrauding them and inflating its stock price by ‌failing to ⁠disclose slowing ⁠growth in its Azure cloud business and the need to spend billions of dollars on AI infrastructure.

The proposed class action led by a Michigan pension fund was filed in Seattle federal ​court on Friday, after Microsoft shares fell 10% on January 29 in response to its quarterly earnings report a day earlier.

About $357 billion of market value ​was erased, and Microsoft's stock suffered its biggest ⁠one-day decline ‌in nearly six years.


Microsoft did not immediately respond on Monday ​to requests for ​comment.

*For its fiscal second quarter ending in December, Microsoft ⁠reported 39% revenue growth in its Azure and other cloud ​businesses, meeting analyst forecasts but down from 40% ​in the prior quarter, and projected 37% to 38% growth in the first three months of 2026.

* Microsoft also reported $37.5 billion of capital spending in its second quarter, up nearly 66% from a year earlier and above the $34.3 billion that analysts projected.

* The lawsuit said Microsoft attributed the slowing Azure growth and ‌higher spending to capacity constraints as it diverted resources to AI-related research and development and to its Copilot chatbot, whose rivals include Google's Gemini and OpenAI's ChatGPT.

* Microsoft, ⁠based in Redmond, Washington, is a major investor in OpenAI.

* The lawsuit is led by the City of St. Clair Shores Police and Fire Retirement System ​in Michigan.

* Defendants include several Microsoft officials, including Chief Executive Satya Nadella and Chief Financial Officer Amy Hood.

* The proposed class period runs from May 1, 2025 to January 28, 2026.

* It is common for shareholders to sue companies for alleged securities fraud after unexpected declines in stock prices.