TLDR
- Microsoft (MSFT) closed at $495 on September 5, down 2.55%, with pre-market trading at $500.41.
- Azure cloud services were disrupted due to undersea cable cuts in the Red Sea, affecting connectivity in Asia and the Middle East.
- Microsoft rerouted traffic and said no issues remained by Saturday evening, though latency was reported earlier.
- Red Sea cable damage also impacted countries like India and Pakistan, raising security and sabotage concerns.
- MSFT has a 5-year return of 140.96%, outpacing the S&P 500’s 89.13%, but trades at a forward P/E of 31.95.
Microsoft Corporation (NASDAQ: MSFT) stock closed at $495 on September 5, down 2.55%, before edging up to $500.41 in pre-market trading.
Just recently, the company confirmed disruptions to its Azure cloud services due to undersea cable cuts in the Red Sea.
In an update posted Saturday, Microsoft said Azure traffic routed through the Middle East might experience latency, though other regions remained unaffected. By evening, the company reported no remaining Azure issues.
Broader Internet Impact
The cuts were not confined to Microsoft’s platform. NetBlocks, an internet monitoring group, confirmed outages across several countries, including India and Pakistan. The Pakistan Telecommunication Company identified the damage near Jeddah, Saudi Arabia, and warned of possible slowdowns during peak usage.
Undersea cables, critical to global data flows, are vulnerable to accidents such as ship anchors but have also been targets in geopolitical conflicts. Similar incidents in 2024 disrupted Asia-Europe internet traffic, with suspicions of sabotage in the region.
Security and Geopolitical Risks
The Red Sea has become a focal point for undersea infrastructure security concerns. Yemen’s government previously warned of potential threats from Houthi forces, although the group denied targeting cables. In Europe, suspected sabotage of Baltic Sea cables since 2022 has further highlighted vulnerabilities.
Microsoft said it would “continuously monitor, rebalance, and optimize routing” until full service restoration, acknowledging that repairs to undersea fiber cuts can take significant time.
Financial Position and Valuation
Despite the service disruption, Microsoft remains financially strong. The company reported revenue of $281.72 billion over the trailing twelve months, with a profit margin of 36.15%. Net income reached $101.83 billion, supported by robust demand for cloud and AI services.
Valuation metrics show Microsoft trading at a trailing P/E of 36.29 and forward P/E of 31.95, with a PEG ratio of 2.17. Its market cap stands at $3.68 trillion, supported by $94.56 billion in cash and $61.07 billion in levered free cash flow.
Performance Overview
Microsoft’s stock continues to outperform benchmarks. As of September 5, YTD return was 18.08% versus the S&P 500’s 10.20%. Over one year, shares returned 22.12%, while 3-year gains reached 98.12%. Over five years, MSFT posted a total return of 140.96%, well ahead of the S&P 500’s 89.13%.
While Azure’s brief setback underscores infrastructure risks, Microsoft’s leadership in cloud and AI markets remains intact, leaving long-term growth prospects resilient despite short-term connectivity concerns.
