Microsoft points to 'broad recovery and stability' after widespread Outlook outage

By Steve Goldstein and William Gavin

The outage could result in a $100 million to $400 million negative impact to Microsoft if the company offers credits and other compensation to customers, analyst says

Microsoft said Friday that it's making headway in resolving the massive disruption to some of its services.

A Microsoft outage extended into a second day, ensnarling businesses, schools and other organizations, though the company says it's now seeing "broad recovery."

The company on Friday apologized for the disruption to customers and partners, while pointing to "stability" across its services. It's continuing to restore service to customers and regions, it said.

"This was a technical issue not related to cyber or AI/agents," Microsoft (MSFT) said in a statement. "The incident was introduced by an issue during an earlier network capacity upgrade that surfaced following a recent network change."

The outage has affected several popular services, including Outlook. Microsoft said mailbox access may fail and email delivery is delayed. Core functions within Teams are working, but some aspects of the messaging service aren't operating properly.

The website Downdetector said that it had seen reports of five Microsoft services being down in 74 countries and territories.

The outage impacted government agencies across Australia, Japan, the U.S. and the U.K. and prevented some companies from publishing earnings. The company's Azure cloud-computing platform remained functional, according to Microsoft's status page.

Microsoft can likely brush off the financial cost. Evercore ISI analyst Kirk Materne said in a client note that his "rough estimate" calls for a "benign" negative impact of between $100 million and $400 million. That's based on his estimate of perhaps 100 million affected paid "seats," or employee licenses. It also factors in an assumption that Microsoft would offer a 50% credit on the roughly $4 to $8 monthly per-user service fees.

For many companies, that would be a sizable amount, but it pales in comparison to Microsoft's $92 billion in revenue last quarter.

"That said, it was obviously a major distraction for businesses and not a great look heading into Ignite next week," Materne added, referring to Microsoft's annual conference, which is scheduled to kick off on Nov. 17.

In disrupting business functions, the outage is reminiscent of one that affected Cloudflare (NET) a year ago and limited access to vital workplace applications. Tony Burke, Australia's home affairs minister, also compared the Microsoft outage to a 2024 incident in which millions of computers were effectively disabled following a software update from the cybersecurity firm CrowdStrike (CRWD). That incident grounded flights and disrupted operations at hundreds of hospitals.

Among the Microsoft products affected in the current outage is artificial-intelligence assistant Copilot, which Microsoft has aggressively promoted. Copilot was the first topic CEO Satya Nadella discussed during the company's earnings call in late October, as he highlighted that daily users were up nearly 50% from the quarter before.

Microsoft shares were up slightly in recent action on Friday, reversing course after being down in earlier trading.

Microsoft's stock has held up better than many other AI-exposed names recently. That said, earlier this week investors got slightly spooked by the launch of Claude Whiteboards and Sheets, which are products from Anthropic that focus on workplace productivity.

-Steve Goldstein -William Gavin

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