Microsoft sued for $357 billion wipeout over Azure slowdown, AI spending

Microsoft got slapped with a lawsuit from its own shareholders, who say the company lied about how its cloud business was slowing down and how much it was spending on AI. The result? A 10% stock crash on January 29 that wiped out $357 billion in market value — that's the biggest one-day loss for the company in nearly six years.

The proposed class action was filed on June 12 in Seattle federal court. It's led by the City of St. Clair Shores Police and Fire Retirement System, a pension fund for public safety workers in Michigan. The lawsuit names Microsoft CEO Satya Nadella and CFO Amy Hood as defendants, along with other company officials.

Here's what the shareholders are angry about. For its fiscal second quarter ending in December 2025, Microsoft reported 39% revenue growth in its Azure cloud business. That met analyst forecasts, but it was down from 40% in the previous quarter. Even worse, the company projected growth would slow further to 37% to 38% in the first three months of 2026.

At the same time, Microsoft's capital spending hit $37.5 billion in that second quarter — up nearly 66% from a year earlier and way above the $34.3 billion analysts expected. The lawsuit says the company blamed the slowdown and higher spending on capacity constraints as it shifted resources to AI research and its Copilot chatbot, which competes with Google's Gemini and OpenAI's ChatGPT.

Microsoft is a major investor in OpenAI, the company behind ChatGPT. The lawsuit claims Microsoft failed to disclose these problems earlier, artificially inflating its stock price during the proposed class period from May 1, 2025 to January 28, 2026.

"Microsoft stands by the integrity of its public statements and will vigorously defend itself in court," the company said on Monday, June 15, calling the claims "without merit."

It's pretty common for shareholders to sue companies after unexpected stock drops — they argue executives misled them. But the scale here is massive: $357 billion is more than the entire GDP of countries like Nigeria or the Philippines.

The court will decide whether to certify the class action. If it does, all shareholders who bought Microsoft stock during the class period could join the lawsuit. Microsoft will try to get it dismissed, arguing its statements were accurate and forward-looking.

For now, the case is a reminder that even the world's most valuable companies aren't immune to shareholder anger when growth slows and spending balloons. And with AI costs exploding across the tech industry, this kind of fight might become more common.