Microsoft has been sued by shareholders who allege the company misled them about slowing growth in its Azure cloud computing business and the scale of its artificial intelligence infrastructure spending, causing its stock price to be artificially inflated, as per a recent report by Reuters.
The proposed class action, led by the City of St. Clair Shores Police and Fire Retirement System in Michigan, was filed in federal court in Seattle on Friday. According to the Reuters report, this incident follows a sharp share price drop on January 29, when Microsoft’s stock fell 10% after its quarterly earnings report, wiping out roughly $357 billion in market value in its biggest one-day decline in nearly six years.
The lawsuit covers the period from May 1, 2025 to January 28, 2026. It names several senior Microsoft officials as defendants, including chief executive Satya Nadella and chief financial officer Amy Hood.
According to the lawsuit, Microsoft blamed the decelerating Azure growth and the elevated spending on capacity constraints as it channelled resources into AI research and development, including its Copilot chatbot, which competes with offerings from Google and OpenAI. Microsoft is a major investor in OpenAI.
According to the report, Microsoft said on Monday that it believes the claims are “without merit,” adding, “Microsoft stands by the integrity of its public statements and will vigorously defend itself in court.”
It is not unusual for shareholders to bring securities fraud lawsuits after an unexpected stock price fall, though few cases reach trial, suggests the report.