Shareholders Sue Microsoft: Downplaying AI Infrastructure Costs, Hiding Azure Growth Slowdown

Reuters published a blog post yesterday (June 15), reporting that based on a class action lawsuit filed this week in the US Federal Court in Seattle, shareholders have accused Microsoft of downplaying the costs of AI infrastructure and concealing the slowdown in growth of Azure.

The lawsuit was initiated by the City of St. Clair Shores Police and Fire Retirement System in Michigan, representing other investors who purchased Microsoft shares, and filed with the Federal Court in Seattle against Microsoft and certain executives, including CEO Satya Nadella and CFO Amy Hood, as a class-action securities lawsuit.

In this class action, the plaintiffs allege that Microsoft deliberately amplified the AI business narrative to divert market attention from the slowing growth of its cloud business and the surging infrastructure costs, thereby conveying overly optimistic growth expectations to investors.

The plaintiffs believe Microsoft intentionally downplayed AI infrastructure costs, asserting that the construction of data centers required to support next-generation AI tools demands significant capital investment, and the return on investment would not come easily or quickly.

According to financial reports, in the second fiscal quarter of 2026 ending December 2025, revenue from Azure and other cloud businesses grew by 39%, in line with analysts’ expectations but lower than the 40% growth in the previous quarter. At the same time, the company expects the growth rate of this business to slow to 37% to 38% in the first three months of 2026, indicating the pace of expansion in its cloud business continues to decline.

In terms of capital expenditure, Microsoft's capital expenditure for the quarter reached $37.5 billion (approximately RMB 253.947 billion at the current exchange rate), representing a year-on-year increase of 66%, significantly exceeding analysts' expectations at the time. The report points out that much of this funding was allocated to high-priced GPUs and custom chips used for training and running large language models.

Microsoft stated that the related accusations are "baseless," the company stands by the integrity of its public statements, and will actively respond to the case in court.