Microsoft Stock Plummets but Future Looks Bright
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Should l Buy MSFT?
Source: Fool
- Stock Decline: Microsoft's stock has dropped 20% this year and is down about 30% from its all-time high, despite the company continuing to grow strongly, indicating a market undervaluation of its future potential.
- AI Growth Potential: Microsoft's positioning in the artificial intelligence sector makes it a key toolkit provider, with analysts forecasting a 16% revenue growth for fiscal 2026, further solidifying its market position.
- Attractive Valuation: The current operating PE ratio for Microsoft is at its lowest since 2017, presenting investors with a once-in-a-decade buying opportunity, especially amid increasing market uncertainties.
- Earnings Report Catalyst: Microsoft is set to release its quarterly earnings at the end of the month, with analysts generally optimistic about its performance, which could serve as a significant catalyst for a stock rebound.
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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: 420.260
Low
500.00
Averages
631.36
High
678.00
Current: 420.260
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.
Microsoft Stock Down 22% Faces Challenges Ahead of Earnings
- 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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- Access Distribution: Through a controlled initiative called 'Project Glasswing', Anthropic granted preview access to tech giants including Amazon, Microsoft, Nvidia, and Apple, as well as over 40 additional organizations maintaining critical software infrastructure, highlighting its significant industry influence.
- Security Risks Warning: Experts have warned that Mythos can identify and exploit previously unknown vulnerabilities faster than companies can repair them, with its advanced coding and autonomous capabilities potentially accelerating sophisticated cyberattacks, particularly in sectors like banking that rely on complex technology systems.
- Government Attention and Regulation: The White House has engaged in discussions with Anthropic CEO Dario Amodei regarding collaboration, cybersecurity, and balancing AI innovation with safety, despite the Pentagon imposing a formal supply-chain risk designation on Anthropic, indicating high governmental concern over the model's potential risks.
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Microsoft's Cloud Business Thrives Amid AI Spending Concerns
- Cloud Revenue Growth: Microsoft's revenue from Azure, Microsoft 365, and other cloud services rose 26% year-over-year, reaching an annual run rate of $204 billion, demonstrating the company's strong performance in high-growth, recurring subscription services and solidifying its market position.
- Surge in Capital Expenditures: Microsoft's capital expenditures have nearly tripled over the past three years to $83 billion, with about one-third allocated to long-lived assets like data centers, indicating the company's confidence in future growth through these strategic investments expected to monetize over the next 15 years.
- Long-Term Profit Potential: While near-term profits may face pressure from upfront costs, Microsoft's heavy investment strategy is designed to lay the groundwork for higher margins over time, as AI services scale across that infrastructure, suggesting substantial returns in the future.
- Stock Price Pullback Opportunity: After a 36% decline, Microsoft's stock has rebounded but remains down about 23%, yet the current lower earnings multiple presents an attractive entry point for investors, especially with analysts maintaining a bullish outlook on its cloud business and AI momentum.
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Microsoft Stock Pullback Amid Strong Cloud Growth
- Stock Volatility: Microsoft's shares fell as much as 36% in late March before rebounding, yet are still down about 23% from their peak, reflecting market rotation out of AI stocks despite the company's strong fundamentals.
- Cloud Service Growth: Revenue from Azure, Microsoft 365, and other cloud services rose 26% year-over-year, reaching an annual run rate of $204 billion, highlighting the support of high-growth subscription models, particularly with Azure's revenue up 39% year-over-year.
- Increased Capital Expenditures: Microsoft's capital expenditures have nearly tripled to $83 billion over the past three years, with about one-third allocated to long-lived assets like data centers, investments expected to monetize over the next 15 years, laying the groundwork for higher margins.
- Investment Opportunity: While near-term profits may face pressure from upfront costs, Microsoft's current lower earnings multiple presents a compelling entry point for investors, especially as AI services scale across the infrastructure.
See More
Microsoft Earnings Preview: AI and Cloud Growth Potential
- Upcoming Earnings Report: Microsoft is set to release its fiscal 2026 Q3 earnings on April 29, which is expected to provide crucial updates on AI products and services like the Copilot virtual assistant and Azure cloud platform, potentially acting as a bullish catalyst for the stock.
- Copilot Adoption Surge: As of December 31, only 15 million Copilot for 365 licenses were sold, reflecting a modest penetration rate of 3.7%, yet this represents a 160% year-over-year increase, indicating strong market demand, with investors looking for higher growth figures in the earnings report.
- Azure as Growth Engine: Microsoft invested $118 billion in data centers over the past four quarters, with Azure revenue growing at least 39% year-over-year in the first two quarters of fiscal 2026, highlighting its status as the fastest-growing segment, despite facing significant order backlogs.
- Valuation Appeal: With a current P/E ratio of 26.4, below its five-year average of 32.9, Microsoft appears undervalued, and if it can alleviate concerns regarding its cloud order backlog in the earnings report, the stock could rise by 24%, offering substantial returns for investors.
See More
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See More
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- 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.
See More
Anthropic Launches Advanced AI Model Mythos for Cybersecurity
- Mythos Model Launch: Anthropic debuted its latest AI model, Mythos, earlier this month, equipped with advanced cybersecurity capabilities that uncovered 'thousands' of major vulnerabilities across every major operating system and web browser, raising concerns about threats to traditional software security.
- Access Distribution: Through a controlled initiative called 'Project Glasswing', Anthropic granted preview access to tech giants including Amazon, Microsoft, Nvidia, and Apple, as well as over 40 additional organizations maintaining critical software infrastructure, highlighting its significant industry influence.
- Security Risks Warning: Experts have warned that Mythos can identify and exploit previously unknown vulnerabilities faster than companies can repair them, with its advanced coding and autonomous capabilities potentially accelerating sophisticated cyberattacks, particularly in sectors like banking that rely on complex technology systems.
- Government Attention and Regulation: The White House has engaged in discussions with Anthropic CEO Dario Amodei regarding collaboration, cybersecurity, and balancing AI innovation with safety, despite the Pentagon imposing a formal supply-chain risk designation on Anthropic, indicating high governmental concern over the model's potential risks.
See More
Microsoft's Cloud Business Thrives Amid AI Spending Concerns
- Cloud Revenue Growth: Microsoft's revenue from Azure, Microsoft 365, and other cloud services rose 26% year-over-year, reaching an annual run rate of $204 billion, demonstrating the company's strong performance in high-growth, recurring subscription services and solidifying its market position.
- Surge in Capital Expenditures: Microsoft's capital expenditures have nearly tripled over the past three years to $83 billion, with about one-third allocated to long-lived assets like data centers, indicating the company's confidence in future growth through these strategic investments expected to monetize over the next 15 years.
- Long-Term Profit Potential: While near-term profits may face pressure from upfront costs, Microsoft's heavy investment strategy is designed to lay the groundwork for higher margins over time, as AI services scale across that infrastructure, suggesting substantial returns in the future.
- Stock Price Pullback Opportunity: After a 36% decline, Microsoft's stock has rebounded but remains down about 23%, yet the current lower earnings multiple presents an attractive entry point for investors, especially with analysts maintaining a bullish outlook on its cloud business and AI momentum.
See More
Microsoft Stock Pullback Amid Strong Cloud Growth
- Stock Volatility: Microsoft's shares fell as much as 36% in late March before rebounding, yet are still down about 23% from their peak, reflecting market rotation out of AI stocks despite the company's strong fundamentals.
- Cloud Service Growth: Revenue from Azure, Microsoft 365, and other cloud services rose 26% year-over-year, reaching an annual run rate of $204 billion, highlighting the support of high-growth subscription models, particularly with Azure's revenue up 39% year-over-year.
- Increased Capital Expenditures: Microsoft's capital expenditures have nearly tripled to $83 billion over the past three years, with about one-third allocated to long-lived assets like data centers, investments expected to monetize over the next 15 years, laying the groundwork for higher margins.
- Investment Opportunity: While near-term profits may face pressure from upfront costs, Microsoft's current lower earnings multiple presents a compelling entry point for investors, especially as AI services scale across the infrastructure.
See More
Microsoft Earnings Preview: AI and Cloud Growth Potential
- Upcoming Earnings Report: Microsoft is set to release its fiscal 2026 Q3 earnings on April 29, which is expected to provide crucial updates on AI products and services like the Copilot virtual assistant and Azure cloud platform, potentially acting as a bullish catalyst for the stock.
- Copilot Adoption Surge: As of December 31, only 15 million Copilot for 365 licenses were sold, reflecting a modest penetration rate of 3.7%, yet this represents a 160% year-over-year increase, indicating strong market demand, with investors looking for higher growth figures in the earnings report.
- Azure as Growth Engine: Microsoft invested $118 billion in data centers over the past four quarters, with Azure revenue growing at least 39% year-over-year in the first two quarters of fiscal 2026, highlighting its status as the fastest-growing segment, despite facing significant order backlogs.
- Valuation Appeal: With a current P/E ratio of 26.4, below its five-year average of 32.9, Microsoft appears undervalued, and if it can alleviate concerns regarding its cloud order backlog in the earnings report, the stock could rise by 24%, offering substantial returns for investors.
See More
Analyst Blog Highlights Featured Stocks and ETFs
- Microsoft's Strong Performance: Microsoft's shares have outperformed the Zacks Computer Software industry over the past year with a 16.3% increase, driven by robust AI business momentum and widespread adoption of Copilot, which has propelled growth in Productivity and Business Processes revenue, showcasing the company's strategic advantage in cloud infrastructure expansion.
- AbbVie's Successful New Drugs: AbbVie's stock has outperformed the Large Cap Pharmaceuticals industry with a 25.9% increase over the past year, successfully navigating the loss of exclusivity for Humira by launching new immunology drugs Skyrizi and Rinvoq, which are expected to support revenue growth in the coming years despite facing some market pressures.
- BHP's Continued Growth: BHP's shares have risen 79.8% over the past year, with a 2% increase in iron ore output in the first half of fiscal 2026, and the company projects annual production between 258-269 million tons, indicating its strategic positioning in the global decarbonization trend.
- CBL Properties' Outstanding Performance: CBL & Associates Properties' shares have surged 98.4% over the past year, with a market capitalization of $1.33 billion, as management enhances financial flexibility through capital recycling and asset optimization strategies, despite challenges from tenant disruptions and economic slowdowns.
See More
