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Microsoft stock falls as Azure cloud business struggles.
Shares of Microsoft earlier this week fell to their lowest level since November last year after the Swiss financial holding UBS Group AG downgraded the rating of its securities. The holding explained its decision by concern about the slowdown in the growth of Azure, Microsoft's cloud division, which for many years has been one of the main drivers of revenue growth. It should be added that in 2022, the company's shares fell by 29%, which is the sharpest drop since 2008.
UBS noted that the Azure business, which it called the company's growth engine, "is experiencing a sharp slowdown in growth that could be worse in fiscal year 2023-2024 than investors are forecasting." Business "may slow down due to reaching the stage of full maturation, and not just because of the difficult macroeconomic situation," said the holding, which lowered its target share price from $300 to $250. It is noted that the transition to remote work during the pandemic has led to a boom in demand for PCs and cloud applications such as collaboration software. But the economic boom went into decline, and it became impossible to maintain high growth rates.
In its last quarterly report, released in October, Microsoft provided a weak forecast for Azure sales growth, prompting analysts to lower their forecasts for its cloud business as well. Despite such concerns, the majority of Wall Street analysts over 90% still recommend buying Microsoft stock, and none of them recommend selling it. In the past year, many companies have experienced falling stocks, which was caused, among other things, by the efforts of the US Federal Reserve to fight inflation.