Microsoft shares have slipped into territory not seen since the depths of the pandemic, closing Wednesday at €335.40 — roughly 17% below where they started 2026 and nearly 30% off last October’s 52-week high. The slide reflects a rare disconnect: a booming cloud business that cannot outrun the sheer weight of the AI infrastructure bill.
The company poured nearly $31 billion into property, plant and equipment in its fiscal third quarter, almost double the $17 billion it spent a year earlier. While Azure continues to gallop ahead with around 40% revenue growth, the cost of that expansion is eating into margins. Intelligent Cloud sales rose 30%, but the cost of those revenues surged 47%. The result is a profit squeeze that has prompted a handful of Wall Street houses to trim their price targets — BMO Capital cut to $500 from $515 and Wolfe Research to $525 — even as 36 of 37 analysts tracked still rate the stock a buy, with a consensus target of roughly $564.
At the same time, Microsoft is slimming down its workforce. The company is cutting around 4,800 roles globally, with the heaviest reductions — 3,200 positions — falling in its Xbox and gaming division. Several studios, including Ninja Theory and Double Fine Productions, are being sold off, and the Game Pass subscription service has missed internal goals. The restructuring is intended to sharpen focus on higher-margin businesses, but it adds a layer of near-term uncertainty to a stock already priced for disappointment.
Should investors sell immediately? Or is it worth buying Microsoft?
A separate, more ephemeral headwind surfaced this week when reports emerged that Microsoft had allegedly tracked a hacker using a global device ID, raising fresh data-privacy jitters. Though the incident did little to shift analysts’ long-term views, it contributed to the cautious tone around the name.
Technically, the stock sits well below both its 50-day and 200-day moving averages — the latter near €380 — confirming the bearish momentum. Yet value hunters note that if Microsoft hits the roughly $22.50 per share in earnings expected for fiscal 2028, the forward price-to-earnings ratio would dip to about 17, a level rarely seen for a tech bellwether with this degree of recurring revenue.
The next major test comes after the U.S. market close on July 29, 2026, when Microsoft reports fourth-quarter results. Investors will be watching for any sign that the huge outlays on data centers are beginning to translate into stable cloud margins and reliable profit growth. Until that proof arrives, the market seems content to punish Microsoft for spending big — even as it rewards the underlying demand that makes the spending necessary.
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