Nasdaq futures drop 1% after Microsoft’s bleak outlook

After forecasting current-quarter cloud revenue below Wall Street expectations, Microsoft led falls in tech companies on Wednesday, causing the Nasdaq futures to drop more than 1%.

Shares of Microsoft Corp. (NASDAQ:MSFT) dropped 2.1% in premarket trade after the firm warned that the expansion of its cloud business, which helped it beat analysts’ estimates in the second quarter, may slow down while its PC division is still having trouble.

Other large growth stocks including Inc (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) Inc, Apple Inc (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL) Inc also dropped between 1% and 2%.

After taking a beating last year, growth stocks saw a rebound in January. Investors now pay close attention to earnings reports to determine how the Federal Reserve’s rate hikes will affect certain equities and whether the newfound interest in them will last.

According to Sophie Lund-Yates, chief stock analyst at Hargreaves Lansdown, “Microsoft is suffering with a dramatic slowdown in personal computer revenues, which reflects the tough consumer environment.”

Purchasing a new laptop and the software that comes with it is not a priority for many individuals right now, despite increased optimism that interest rate hikes may be delayed with peak inflation approaching.

Microsoft also had a networking issue, which affected its Azure cloud platform and services like Teams and Outlook, potentially impacting millions of customers worldwide.

At 5:30 a.m. ET, the S&P 500 was down 31.75 points, or 0.79%, the Nasdaq 100 was down 140.25 points, or 1.18%, and the Dow was down 215 points, or 0.64%.