How to Add Us to Google News Sending You to Google News in 3 © bowie15 from Getty Images Microsoft’ s ( NASDAQ:MSFT | MSFT Price Prediction ) stock had a really strong run through most of 2025, fueled by the company’s all-in bet on artificial intelligence (AI). They wove AI features into Azure cloud services, Microsoft 365 tools, and pretty much everything else, which got investors fired up and drove the share price to new highs. That momentum came to a screeching halt in late October, though, when the stock topped out around $541 per share. Since then, it’s fallen sharply and steadily — down about 27% from that peak to roughly $401 per share now. Year-to-date, shares are off around 17%. The pullback has left a lot of investors on edge, especially since one big factor seems to be driving most of the weakness, prompting questions about whether it’s time to sell. Solid Revenue and Profit Momentum The latest earnings painted a pretty solid picture on the business fundamentals. In the fiscal second quarter, Microsoft pulled in over $81 billion in revenue, up 17% from the year before. The core segments held strong despite some broader market pressures. The Productivity and Business Processes segment, including Microsoft 365 commercial subscriptions and Dynamics, grew 16% to $34 billion. The Intelligent Cloud segment, powered by Azure and other services, surged 29% to nearly $33 billion. The more consumer-oriented Personal Computing side dipped a bit — down 3% to about $14 billion — mostly because gaming was weaker, though search advertising and Windows licensing helped offset some of that. Cloud revenue overall hit $51.5 billion, up 26%, and crossed the $50 billion quarterly mark for the first time. That’s a clear sign of how much the business is shifting toward cloud and AI-driven services. Profitability stayed impressive , too. Gross margins held steady in the high 60% range, even with heavy infrastructure spending. Operating income rose 21% to $38 billion, and net income jumped 60% to $38.5 billion. Adjusted earnings came in at $4.14 per share, up 24%. These numbers show the profitability machine is still humming along nicely, even as the company pours money into future growth. Betting Big on AI Speaking of spending, Microsoft has been going big on capital projects by expanding data centers and building out AI capacity to meet skyrocketing demand, describing it as record-level investment in some areas. All that capex has put some short-term pressure on free cash flow compared to previous years, as resources shift toward scaling up rather than maximizing immediate cash generation. Management has pointed out that demand is actually outpacing supply in spots, which explains the intense spending. That heavier investment has investors a little nervous about near-term cash flow. But on the valuation side, the forward price-to-earnings ratio has come down to the mid-20s, which is one of the more attractive levels in recent years (outside of brief dips). It looks like the market has already priced in a good chunk of the uncertainty, potentially setting up a nice opportunity for long-term believers. The No. 1 Cause for Concern So what is the real source of the recent weakness? A big portion of Microsoft’s future contracted revenue is now tied to OpenAI’s performance, which adds some extra risk. The commercial remaining performance obligation — basically booked future revenue — hit $625 billion, more than doubling from last year. However, roughly 45% of that is linked directly to OpenAI commitments, including some massive multi-year Azure deals. The non-OpenAI part still grew a healthy 28%, which shows solid demand elsewhere, but that concentration spooked investors after the earnings release. People started worrying that any stumble at OpenAI could ripple through a meaningful chunk of future revenue, which has amplified the stock’s volatility. Despite the risk, Microsoft looks well-equipped to weather this and come out stronger. That enormous $625 billion backlog points to sustained enterprise appetite for cloud and AI solutions, and growth isn’t solely riding on OpenAI. Analysts see earnings per share compounding at around 19% to 20% annually through the end of the decade, thanks to Azure’s leadership and Copilot gaining traction across products. At today’s prices, the stock trades at a discount to its historical multiples — even with faster expected growth ahead. Other big tech peers like Amazon ( NASDAQ:AMZN ) or Meta Platforms ( NASDAQ:META ) often carry higher valuations, so if Microsoft moved closer to those levels, there could be serious upside. The average analyst price target sits around $597 per share, suggesting about 49% upside potential from current levels near $401. With rock-solid fundamentals, ongoing AI momentum, and a proven track record, this dip feels more like a temporary breather than a sign of bigger problems. Contact [email protected] for any questions or corrections. 1 INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA( www.finra.org )/SIPC( www.sipc.org ). 2 The probability of a member receiving $3,000 is 0.028%. If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Members must fund their account with a minimum of $50.00 to qualify. The probability percentage is subject to decrease. Members are only eligible for the Stock Award promotion upon opening their first brokerage account; subsequent cash brokerage accounts are ineligible for the promo, including for members with multiple accounts. 3Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees. 4There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event. After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, and Money Morning. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today. Live: Will Applied Materials Crush Tonight’s Q3 Earnings After 200% Rally? Fidelity Government Cash Reserves, FDRXX, Is the Boring Fund Doing the Heavy Lifting REITs Are Quietly Up ~19%, This 7.7% Monthly Payer Owns the Highest-Yielding Ones

Fidelity Parks Your Uninvested Cash in SPAXX by Default, and Most Investors Never Look Our top personal finance-related articles today. Your wallet will thank you later. He Took a Full-Time Job While on SSDI. Social Security Let Him Keep Both Checks for Nine Months. If You Have $750,000 Saved at 58, Here Is the Monthly Income You Can Actually Count On Continue Reading Live: Will Microsoft Soar After Earnings Tonight? Live Updates Microsoft Announces Q3 Guidance - Shares Fall Jan 28, 2026 at 6:12 PM EST Microsoft just announced their… Analysts See 41% Upside for Microsoft Stock After Nearly 100% Backlog Growth Microsoft (NASDAQ:MSFT | MSFT Price Prediction) trades around $408, while Wall Street’s consensus target sits at $576.42, meaning analysts see… After Hitting All-Time High, Can Microsoft Reach $600 This Year? Microsoft (NASDAQ:MSFT | MSFT Price Prediction) stock hit an all-time high of $500.76 per share on June 30, reflecting a… Microsoft (NASDAQ: MSFT) Stock Price Prediction for 2026: Where Will It Be in 1 Year Shares of Microsoft (NASDAQ:MSFT | MSFT Price Prediction) gained 7.57% over the past five trading sessions after losing 4.87% the… Microsoft Stock at $600 or $400? Here’s What You Should Bet On Microsoft (NASDAQ:MSFT | MSFT Price Prediction) has been sliding since October despite the company posting strong results. It is down… Microsoft (NASDAQ: MSFT) Stock Price Prediction and Forecast 2026-2030 (Jan 2026) With its dominance in productivity, business solutions, and cloud computing, 24/7 Wall St. projects strong upside for Microsoft stock through… Bill Ackman Is Going All in on Microsoft. Should You Do the Same? After selling off significantly, Microsoft (NASDAQ:MSFT | MSFT Price Prediction) looks compelling on the numbers, and Bill Ackman appears to… Microsoft Slips as OpenAI Bet Starts to Worry Investors Microsoft (NASDAQ:MSFT | MSFT Price Prediction) stock is sliding approximately 2% to 3% in Tuesday trading, with shares hovering around… Live: Microsoft Reports Q4 Earnings Tonight – Will Its Massive AI Capex Finally Pay Off? Azure growth, a ballooning capex bill, and an OpenAI megadeal all land on the table tonight when Microsoft opens its… Top Gaining Stocks Top Losing Stocks