TLDR
- Microsoft (MSFT) is down 32% from its October 2025 all-time high of $542.07 and down 20% year-to-date — the worst performer in the Magnificent Seven.
- UBS cut its 12-month price target from $600 to $510, citing weak Copilot adoption, while keeping a Buy rating.
- Copilot seat sales stand at 15 million — lower than investors expected — and commercial M365 revenue growth is not accelerating.
- Despite the selloff, Microsoft posted 17% year-over-year revenue growth last quarter, and the stock is near a decade-low price-to-earnings ratio.
- Jim Cramer still calls Microsoft an “elite” AI stock, though he has flagged concerns over the company’s relationship with OpenAI.
Microsoft has had a rough start to 2026. The stock closed at $371.04 on Wednesday — its lowest close since April 2025 — and is on pace for its worst quarterly decline since Q4 2008.
The stock is tracking its worst six-month run since 2009. Since hitting an all-time high of $542.07 in October 2025, Microsoft has shed nearly $1.28 trillion in market value.
It now ranks fourth among the largest U.S. companies by market cap, behind Nvidia, Apple, and Alphabet.
Jim Cramer has been a long-time holder on Microsoft. In September, he called it one of the “elite eight” stocks and said it stands to benefit as investors rotate away from speculative AI plays toward quality names.
But Cramer has also flagged friction between Microsoft and OpenAI. Reports emerged that OpenAI explored working with Amazon to reduce its dependence on Microsoft. Earlier this month, Reuters reported Microsoft was considering legal action against OpenAI and Amazon over a $50 billion deal that allegedly violates its exclusive cloud partnership.
Microsoft holds about a 27% equity stake in OpenAI.
Copilot Adoption Falls Short
The core issue weighing on the stock is Copilot. Microsoft’s AI assistant, built into its Microsoft 365 suite, was meant to be the growth engine justifying the stock’s premium valuation.
Instead, seat sales stand at 15 million. Investors on both sides of the Pacific think that number should be higher. UBS noted the commercial M365 revenue growth curve “should be bending higher and yet it’s not.”
UBS cut its 12-month price target from $600 to $510 on Tuesday. The firm kept a Buy rating but said the Copilot narrative “needs to improve in order for the stock to really re-rate higher.”
Microsoft pushed back somewhat. The company told UBS that Copilot was rebuilt over the past year using improvements from both OpenAI and Anthropic, and that Q2 usage was “very good.” The market, though, is focused on revenue — not usage.
On the competitive front, Microsoft is co-developing a product called Copilot Coworker alongside Anthropic, embedded into Copilot at no extra cost to customers. UBS called it “the best possible chess move.”
Azure Demand Stays Strong, But Questions Remain
Beyond Copilot, Azure is a bright spot — but not without caveats. Cloud revenue rose 39% year-over-year in the most recent quarter.
Microsoft told UBS it was “very bullish” on Azure demand. But the company offered no guidance on Azure growth beyond the current March quarter.
Analysts 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.
The selloff has reset Microsoft’s valuation sharply. The stock is now near its cheapest price-to-earnings level in a decade, after spending much of the past few years at around 35 times earnings.
Revenue grew 17% year-over-year last quarter. Wall Street expects 16% growth next quarter and similar for the full year.
The stock closed at $371.04 on Wednesday, down 32% from its October 2025 peak of $542.07.
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