Various cloud computing stocks are moving in sync in today’s session, following one of the most high-profile earnings reports from Microsoft (NASDAQ:MSFT). Shares of Snowflake (NASDAQ:SNOW) sunk alongside Microsoft this morning, with shares of SNOW stock trading around 2% lower at the time of writing. This move outpaces that of Microsoft, which has seen its shares inch toward positive territory this afternoon.
Microsoft’s earnings report certainly provided a mixed bag for investors to consider. On one hand, the company beat estimates on adjusted earnings, factoring out a $1.2 billion charge for the company’s recent layoffs. However, the company’s overall revenue came in below expectations, and its cloud segment, Azure, reported revenue in line with expectations. Thus, these results highlight some positives and negatives for investors to consider.
Initially, shares of MSFT stock surged on the news, with most of the collective focus apparently on the company’s cloud business. Shares of SNOW stock followed suit before dropping in pre-market and early trading today on concerns about a broader slowdown. That’s partly due to comments made by Microsoft in its earnings call, noting that a “deceleration” in growth for Azure was likely.
Let’s dive into what this all means for Snowflake investors.
SNOW Stock Dips on Microsoft Earnings
It’s truly incredible to watch how the collective mind of the market digests complex earnings reports such as the recent Microsoft release. The initial surge and subsequent plunge tied to commentary on the outlook for the company’s cloud business reflect how difficult it can be to take these backwards-looking numbers at face value.
Microsoft’s numbers and forecast may not necessarily be particularly accurate for Snowflake. That’s because Snowflake is positioned differently in the market with a different growth profile.
That said, there does appear to be more widespread reason for concern among cloud players considering the disconcerting tone Microsoft CEO Satya Nadella displayed on the call. If cloud spending falls off, high-growth stocks like Snowflake could get hit harder. That appears to be what many investors are pricing in today, leading to the stock’s relative underperformance.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.