Microsoft’s shares dropped $4.75, or 4.4%, to $60.24 in early trading.
The company reported its second straight quarter of falling profits, and the second straight year in which it missed its guidance of $20.8 billion.
The company had originally forecast the company would be profitable in the third quarter.
Microsoft’s stock fell to $53.85, down 6.9% from the $53 it closed in March.
Microsoft has been under increasing pressure to do more to support its Surface devices as the PC market starts to take off.
But Microsoft’s Surface Pro tablets and its Surface Book are facing stiff competition from Apple and Samsung.