Microsoft (MSFT) Stock Falls 32% from All Time-High — Is the Worst Over?

TLDR

• Microsoft stock is down nearly 32% from its October 2025 all-time high of $542.07, tracking its worst six-month stretch since 2009.
• UBS cut its 12-month price target from $600 to $510, citing investor disappointment with Microsoft 365 Copilot adoption.
• The stock closed at $371.04 on Wednesday — its lowest close since April 22, 2025 — and is on pace for its worst quarterly decline since Q4 2008.
• Both U.S. and Asian investors largely agree that Copilot seat sales of 15 million are lower than expected, and revenue growth isn’t accelerating.
• Despite the selloff, Microsoft’s revenue grew 17% year-over-year last quarter, and the stock is now trading near its cheapest price-to-earnings level in a decade.

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Microsoft has had a rough 2026. The stock is down 20% year-to-date, making it the worst performer in the so-called Magnificent Seven. That’s a long fall from its peak of $542.07, hit just five months ago.

Microsoft Corporation, MSFT

The numbers are stark. It’s on pace for its largest quarterly drop since Q4 2008, its worst three-month start to a calendar year on record, and its longest monthly losing streak since a six-month skid that ended in February 2009. That’s a lot of records — and not the kind anyone wants.

On Tuesday, UBS analysts cut their 12-month price target for Microsoft from $600 to $510. They kept a Buy rating, but the language in the note was pointed. The narrative around Microsoft 365/Copilot “needs to improve in order for the stock to really re-rate higher.”

The issue comes down to one product: Copilot.

Microsoft’s AI assistant, baked into its Microsoft 365 suite, was supposed to be the growth engine that justified the stock’s premium valuation. Instead, seat sales — what the company calls subscription numbers — stand at 15 million. Investors in both Asia and the U.S. think that number should be higher. The commercial M365 revenue growth curve, UBS noted, “should be bending higher and yet it’s not.”

Microsoft pushed back on the criticism somewhat. The company told UBS that Copilot was rebuilt over the past year using improvements from both OpenAI and Anthropic, and that usage in Q2 was “very good.” But usage and revenue growth are two different things, and the market is focused on the latter.

Azure Growth in Focus

There’s a secondary concern beyond Copilot. UBS noted that Microsoft was “very bullish” on Azure demand — including core CPU-based demand — but offered no guidance on Azure revenue growth beyond the current March quarter. Analysts also flagged that a GPU capacity shift, which already weighed on the stock after Q2 earnings, could continue to slow Azure’s growth in coming quarters.

That’s a meaningful caveat for a business where cloud revenue rose 39% year-over-year in the most recent quarter.

On the Copilot side, Microsoft is taking a collaborative approach to stay competitive. The company is co-developing a product called Copilot Coworker alongside Anthropic and embedding it into Copilot at no added cost to customers. UBS called it “the best possible chess move,” allowing Microsoft to move fast without building everything in-house.

Valuation Has Reset Sharply

The selloff has brought Microsoft’s valuation to levels not seen in years. Its price-to-earnings ratio is now at one of its lowest points in the past decade.

For context, Microsoft spent much of the past few years trading at around 35 times earnings — a steep premium to the broader market. The S&P 500 currently trades at roughly 24 times earnings. Whether Microsoft deserves that premium remains a debate, but analysts who follow the stock closely argue the current discount is overdone given the company’s fundamentals.

Revenue grew 17% year-over-year last quarter. Wall Street expects 16% growth next quarter and similar for the full year. Those are not the numbers of a company in trouble.

Since its October 2025 peak, Microsoft has lost nearly $1.28 trillion in market value. It now sits fourth among the largest U.S. companies by market cap, behind Nvidia, Apple, and Alphabet.

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