Microsoft beat earnings but fell 10% on AI spending worries, despite strong backlog and new AI deal.

Microsoft's Q2 earnings beat expectations with $4.14 EPS and $81.27 billion in revenue, up 16.7% year-over-year, but the stock dropped 10% after the report due to concerns over rising AI spending and slowing Azure growth. Despite the selloff, institutional investors increased stakes, and the company secured a $750 million AI cloud deal with Perplexity. Microsoft’s commercial backlog reached $625 billion, signaling strong future revenue, while analysts maintain a "Moderate Buy" consensus with a $597.73 average price target. The stock has a market cap of $3.2 trillion and a P/E ratio of 26.91.