Stock trails broader market in 2026
Microsoft (MSFT) has evolved into a diversified technology giant built around three major segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Yet despite its scale, the stock has struggled this year.
As of Monday afternoon, April 20, shares were down about 13% year to date, while the SPDR S&P 500 ETF (SPY) gained roughly 4% over the same period.
Investor focus remains squarely on artificial intelligence. Microsoft’s flagship AI offering, Microsoft 365 Copilot, is seen as the company’s long-term growth engine.
The stock fell sharply following fiscal Q2 2026 earnings on January 28. Shares closed at $481.63 before the report and dropped to $433.55 the next day, a decline of roughly 10%.
During the earnings call, CFO Amy Hood said, “Approximately 45% of our commercial remaining performance obligations balance is from OpenAI.” Microsoft’s total remaining performance obligations stand at $625 billion, according to its latest Form 10-Q, prompting concerns among some investors about concentration risk.
Strategic AI moves ahead of earnings
Microsoft is scheduled to report Q3 fiscal 2026 earnings on April 29 after the market close.
In preparation, the company has made several strategic adjustments. On January 26, it introduced Maia 200, its updated custom AI inference accelerator, aimed at strengthening internal AI infrastructure.
Microsoft also reshaped leadership by appointing Jacob Andreou as executive vice president for Copilot, signaling a sharpened focus on product execution and commercialization.
Notably, Microsoft did not participate in OpenAI’s most recent funding round, though both companies issued a joint statement reaffirming their partnership.
In March, the company launched Copilot Cowork in its Frontier early access program. The new version emphasizes multi-step task execution, allowing users to define outcomes while the system builds plans, coordinates tools, and advances workflows with visible progress tracking.
Bank of America outlook: Azure growth critical
Bank of America analyst Tal Liani reiterated a buy rating with a $500 price target, based on a 24x forward price-to-earnings multiple for 2027, above peer averages of 18x to 22x.
Liani estimates Q3 revenue of $81.4 billion, net income of $30.2 billion, and GAAP earnings per share of $4.05, largely in line with consensus expectations.
The key variable remains Azure cloud growth. Azure expanded 38% year over year in constant currency last quarter, with management suggesting growth could have exceeded 40% without compute constraints. Bank of America projects Q3 Azure growth of 37.5% constant currency, in line with Wall Street forecasts.
Analysts indicate that upside in Azure growth could be necessary for the stock to regain momentum.
Risks and investor concerns
Additional areas under scrutiny include Copilot monetization. The previous quarter showed roughly 15 million Copilot seats, representing about 3.5% of Microsoft 365 commercial seats.
Potential downside risks cited by analysts include:
- Near-term gross margin pressure
- Rapid innovation from competing AI application and model providers
- Cyclical enterprise software spending trends
With heavy AI investment and high expectations built into valuations, Microsoft’s upcoming earnings report may determine whether confidence in its AI strategy translates into renewed stock performance.
