Shares in Microsoft, which had been up all week, suddenly plummeted by 7% Wednesday after the company released its fiscal first-quarter earnings and gave a weak quarterly forecast.

On a conference call with analysts, Satya Nadella said that the cyclical tendencies of the business are affecting Microsoft’s consumer business.

Microsoft’s stocks

Facebook closed down 7% Wednesday, a day after the company released its fiscal first-quarter earnings.

Microsoft exceeded analyst estimates on top and bottom lines, but the stock was pressured by a lousy forecast and their cloud revenue, which missed expectations.
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Microsoft’s “Intelligent Cloud” business, which includes cloud computing service Azure, generated $20 billion in revenue for the company according to its statement. This is a 20% increase from last quarter and slightly less than StreetAccount’s prediction of $20.36 billion.

Analysts were looking for Microsoft to produce $56.05 billion in revenue but they only predicted the company would make $52.35-$53.35 billion, which translates to 2% growth on the higher end and a small decrease at the low end.

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Microsoft’s CEO, Satya Nadella, said during an analyst call that we may see weaker PC demand affect Microsoft’s consumer business. CFO, Amy Hood, said that Windows revenue from device makers will drop by a percentage in the high 30s during the second fiscal quarter of 2018.

Analysts at Goldman Sachs were not discouraged by the weaker, cyclical segments of GE and reiterated their buy rating on the stock. They believe that those segments could rebound in a more favorable macroeconomic environment.

They anticipate revenue reacceleration next year.

Analysts are optimistic about the company’s position within its existing customer-base. “Even in a slower growth environment, we see the company well positioned to continue to win deals and expand its wallet share,” they wrote in a note Tuesday.

Despite the fact that Microsoft was weak in the areas of growth, Morgan Stanley remains confident in its future potential.

The strength of the company’s positioning for core secular growth trends “remains evident”, they said.

“Bottom line, while heavier cyclical weights bring down our FY23 EPS estimates, we remain firmly convicted in the longer-term secular growth story at Microsoft,” they wrote in a note.

Barclays analysts said Microsoft’s quarterly outlook was a “negative surprise” for investors, and that macroeconomic challenges are slowing migration to the cloud.

Although shares may react negatively in the short term, they say that they’re still optimistic. The company’s management is still guiding for revenue and profit that “should ensure relative outperformance.”

Microsoft shares have fallen 25% so far this year, much more than the 19% decrease in the S&P 500.