The latest source of Wall Street debate isa report saying that Microsoft lowered sales-growth targets for some
artificial-intelligence software.
To investors who have been increasinglyconcerned about a bubble, the report came as validation that AI isn’t so easy to monetize. But some analysts on Wall Street saidinvestors shouldn’t be worried.
At the center of the debate is a reportfrom The Information, which said Microsoft MSFT-2.50% had lowered quotas across
a number of divisions after salespeople missed targets for certain AI products
in the fiscal year that ended in June. The story cited people in Microsoft’s Azure cloud unit.
Evercore ISI analyst Kirk Materne wrote ina Wednesday note that it is still early in the current fiscal year, and that “the key with quota setting is not to make it too hard or too easy toclear the bar.”
Therefore, Materne said he doesn’t “view quota adjustments, especially at theproduct level, as a huge surprise” at this point in theyear.
Mizuho desk-based analyst Jordan Kleinthinks Microsoft’s move wouldn’tnecessarily have been a sudden decision, meaning the company’s guidance for Azure growth likely already factored in the loweredquotas when the company reported earnings results in October.
See more: Why Microsoft’s stock fell in the face of upbeat earnings
“We do not even know how high the priorsales quotas were” between last year and this year,Klein said. “Maybe they were artificially too high andare much more realistic and still pretty good.”
A Microsoft spokesperson said in astatement shared with MarketWatch that the article “inaccuratelycombines the concepts of growth and sales quotas, which shows their lack of
understanding of the way a sales organization works and is compensated.”
The spokesperson said that “aggregate sales quotas for AI products have not been lowered.”
The company’sFoundry platform, which allows users to develop and deploy AI agents and
applications, is reportedly one of the offerings for which sales quotas were
lowered. Cutting targets is uncommon for the tech giant and could reflect a
resistance to new products, The Information said.
However, Foundry only makes up “a tiny part of Azure,” Materne said. Whilecuts aren’t a great look for the company, they “might speak more to the fact that both Snowflake and Databricks areformidable competitors/partners in this area and there could be a view that it’s better to partner [versus] compete at certain levels of the stack,” he said.
Recapping a recent meeting with thecompany, Materne said Microsoft “could not be moredirect that demand is strong, especially for Azure,”which is seeing demand overtake capacity.
Microsoft’s stockfell as much as 3% on Wednesday morning and ended the day off 2.5%.
Taken together with recent market jittersover OpenAI’s dominance after the release of Google’s GOOG +1.46% GOOGL +1.21% Gemini3, Materne said he isn’t surprised that the report sentMicrosoft’s stock down.
“We would be using the weakness as a buyingopportunity into 2026,” Materne said.
Klein, meanwhile, said the report “is backward looking to June [versus] forward looking.”