Microsoft’s AI Spending Comes Under Legal Scrutiny

Microsoft is facing a class-action lawsuit from shareholders who accuse the company of failing to disclose a slowdown in the growth of its Azure cloud platform and underestimating the scale of investment required to develop artificial intelligence. According to the lawsuit, Microsoft misled investors and artificially inflated its stock price.

The lawsuit was filed by a Michigan pension fund in federal court in Seattle. It followed a 10% drop in Microsoft's share price on 29 January after the company released its quarterly results. The decline wiped approximately $357bn from the company's market value.

For its second fiscal quarter, Microsoft reported 39% revenue growth in Azure and other cloud services. Although the result met analysts' expectations, it marked a slowdown from the previous quarter. The company also reported capital expenditures of $37.5bn, up nearly 66% year over year and above market estimates.

According to the lawsuit, Microsoft attributed Azure's weaker growth and higher spending to capacity constraints resulting from the reallocation of resources toward artificial intelligence development, including its Copilot chatbot. Microsoft is one of OpenAI's largest investors.

The defendants include Chief Executive Officer Satya Nadella, Chief Financial Officer Amy Hood and other company executives. The lawsuit covers the period from May 2025 to January 2026.

(Reuters, Max)