Microsoft (NASDAQ:MSFT) shares fell more than 2.5% in premarket trading on Wednesday after the tech giant reported fiscal second-quarter results and issued conservative guidance, prompting debate from several Wall Street analysts.

Wedbush Securities analyst Dan Ives noted that the demand for Azure, Microsoft’s (MSFT) cloud computing services is softening, with guidance for growth in the low 30% range for the March quarter seen as “conservative.” On the conference call, Microsoft (MSFT) management noted the slowdown seen in December has continued to worsen, leaving Ives to ponder Microsoft’s (MSFT) near-term future.

“The question now in the Street’s mind is what does this Azure [deceleration] path look like over the coming quarters in a very uncertain macro,” Ives wrote in a note to clients. “We believe MSFT helped clear the decks on [fiscal 2023 and 2024] numbers that now lay the groundwork for hittable/beatable numbers over the coming quarters with Azure growth stabilizing in the ~30% range the next few quarters.”

Ives added that the PC business, or Microsoft’s (MSFT) Personal Computing business, is a “well known disaster” at this point after revenue for the segment fell 19% from a year ago to $14.2B.

Jefferies analyst Brent Thill, who has a buy rating on Microsoft (MSFT) shares, noted the guidance implies the situation will get worse.

“Expectations are for another 4-5 [point deceleration in constant currency] growth off the mid-30’s [year-over-year constant currency] growth at the end of the [quarter, implying 30-31% year-over-year constant currency growth in fiscal third-quarter vs. 38% this quarter and 42% in F1Q],” Thill wrote in a note to clients.

Thill added that the total revenue guidance for the third-quarter of $50.5B to $51.5B is well below the $52.42B consensus.

Investment firm BMO downgraded Microsoft (MSFT) to market perform from outperform following the report, citing the uncertainty around Azure.

“Until Azure growth stabilizes, we envision the stock being range bound,” analyst Keith Bachman wrote in a note to clients.

Delving deeper, Bachman noted that Azure accounts for roughly 31% of fiscal 2024 revenue estimates and with Azure growth slowing rapidly, annual growth could decelerate between two and three points per quarter through calendar year 2023, whereas he previously thought the decline would start to level out in the second-half.

Bachman also said Microsoft’s (MSFT) current valuation is not “overly compelling,” based off the stock trading at 26 times fiscal 2024 earnings per share estimates.

Barclays analyst Raimo Lenschow, who has an overweight rating on Microsoft (MSFT), said the quarterly results were better than feared, but issues around the guidance for Azure are concerning.

“The Azure growth outlook for [third-quarter of 30-31% year-over-year in constant currency] is around buy side consensus, but is decelerating more (7-8% QoQ) than we have seen previously, which bears may focus on,” Lenschow wrote in a research note.

Lenschow added that Microsoft (MSFT) is protecting operating profit via its recently announced layoffs so the P&L should remain “relatively stable,” but there is likely more pain ahead for the software industry ahead.

On Monday, Microsoft (MSFT) confirmed it had made a “multiyear, multibillion dollar” investment in ChatGPT developer OpenAI.