Microsoft Stock Down 22% Faces Challenges Ahead of Earnings
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Apr 20 2026
0mins
Should l Buy MSFT?
Source: NASDAQ.COM
- Cloud Backlog Concerns: Microsoft has a staggering $625 billion cloud order backlog, with $281 billion attributed to OpenAI, which has reduced its computing capacity spending forecast, leading to decreased market confidence in the backlog and potential revenue growth.
- Upcoming Earnings Report: Microsoft is set to release its fiscal 2026 Q3 earnings on April 29, with investors eager for updates on AI products like Copilot and the Azure cloud platform to assess market performance and growth potential.
- Copilot Adoption Surge: As of December 31, Copilot licenses sold for enterprise 365 reached 15 million, representing a modest 3.7% penetration but showing a robust 160% year-over-year growth, indicating strong market demand and future growth potential.
- Valuation Appeal: With a current P/E ratio of 26.4, below its five-year average of 32.9, Microsoft stock appears undervalued, and if the earnings report alleviates backlog concerns, the stock could rebound significantly, offering substantial returns for investors.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 409.430
Low
500.00
Averages
631.36
High
678.00
Current: 409.430
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Market Trend Shift: Typically, game consoles decrease in price over time to boost sales, but current memory and storage shortages have forced manufacturers to raise prices, a reversal that may affect future sales strategies.
- Uncertain Future Outlook: With shortages expected to last until 2030, Microsoft and Sony may face increased cost pressures and market challenges as they prepare for next-generation consoles, impacting their long-term profitability.
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- Investment Opportunity Seized: Ackman's Pershing Square began accumulating shares in Microsoft after a stock pullback, believing that buying this global tech giant at a valuation of 21 times forward earnings presents a rare opportunity, reflecting confidence in Microsoft's future growth.
- Core Holding Position: Although the exact stake size was not disclosed, Ackman referred to his investment in Microsoft as a 'core holding,' indicating a long-term bullish outlook, particularly regarding the company's competitiveness in AI and cloud computing.
- Market Reaction Analysis: Microsoft's shares have fallen over 26% since reaching a record high in July 2025, primarily due to market concerns about the returns on its AI investments; Ackman believes this excessive worry provides a favorable entry point for investors.
- R&D Investment Outlook: Ackman expressed encouragement regarding Microsoft's R&D efforts with the AI assistant Copilot embedded in M365, asserting that CEO Nadella's direct involvement will enhance product velocity and customer adoption, further solidifying Microsoft's market position.
See More
Ackman Increases Microsoft Stake, Sees Long-Term Value
- Investor Confidence: Billionaire hedge fund manager Bill Ackman revealed that Pershing Square has recently increased its stake in Microsoft, believing that the market underestimates the resilience of M365, which is expected to drive long-term growth for the company.
- Core Business Performance: Microsoft's two core franchises, M365 and Azure, generate approximately 70% of its profits, with M365 regarded as the dominant workplace productivity platform, used daily by over 450 million people, indicating its deep integration within enterprises.
- Market Opportunities: Ackman pointed out that the current market volatility and the rise of passive index investing have created rare dislocations in high-quality stocks, similar to his previous investments in Google, Amazon, and Meta, asserting that MSFT offers compelling long-term value at today's valuation.
- Valuation Analysis: Pershing Square began building its Microsoft position in February at roughly 21x forward earnings, which is close to the broader market multiple and below Microsoft's historical average, reflecting confidence in future growth.
See More
Bill Ackman Takes New Position in Microsoft Shares
- New Investment Direction: Bill Ackman's hedge fund Pershing Square announced it will disclose a new position in Microsoft (MSFT) in its 13F filing, indicating a long-term interest and recognition of the current valuation, especially after a significant decline in the company's stock price.
- Valuation Insight: Ackman noted that Microsoft's forward P/E ratio stands at 21 times, aligning with market averages but below its historical trading levels, highlighting the attractiveness of the current investment opportunity, particularly considering its 27% stake in OpenAI valued at approximately $200 billion.
- Market Reaction: Despite a 17% drop in Microsoft's stock this year, Ackman believes investors underestimate the resilience of M365, emphasizing its deep integration into enterprise workflows and its irreplaceable security and compliance infrastructure.
- Future Outlook: With Microsoft planning to increase capital expenditures to $190 billion in 2026, surpassing Wall Street's estimate of $154.6 billion, Ackman's investment is seen as a strong vote of confidence in Microsoft's growth potential, particularly in the context of an AI-driven market transformation.
See More
Ackman Discloses New Microsoft Position
- New Investment Disclosure: Billionaire investor Bill Ackman announced on social media that his new position in Microsoft will be disclosed later today, indicating his optimistic view on the tech giant's 'highly compelling valuation'.
- Core Holding Adjustment: Ackman's new closed-end fund, Pershing Square USA, has recently made Microsoft a core holding, reflecting his growing interest in tech stocks, particularly in the potential of AI.
- Tech Investment Trend: Over the past year, Ackman has also invested in Meta and Amazon, demonstrating his sustained optimism towards the tech sector, especially against the backdrop of rapid advancements in artificial intelligence.
- Market Reaction Analysis: Although Microsoft's shares have fallen over 15% this year, Ackman's investment decision may attract attention from other investors, particularly as competition in AI intensifies.
See More
