Microsoft’s (MSFT) stock has posted its worst quarterly performance since the 2008 financial crisis after it got caught up in the software sector’s downturn over artificial intelligence (AI) fears.
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MSFT stock plunged 23% in this year’s first quarter, a steeper drop than any other Magnificent 7 megacap technology company or the Nasdaq (NDAQ) exchange on which it trades. The Nasdaq declined 7% in the first three months of the year.
Microsoft remains dominant in workplace productivity software through its Windows operating system. However, the company’s stock has been pressured by worries over AI disruptions and the costs associated with building out AI infrastructure.
The ‘SaaSpocalypse’
Microsoft and other software stocks have been pummeled this year over AI worries. Some stocks, such as Adobe (ADBE) and ServiceNow (NOW), are down more than 30% year-to-date. The decline means that the valuation on MSFT stock is at its lowest level since the fourth quarter of 2022.
Despite the selloff and AI fears, analysts note that Microsoft is still getting healthy growth from its Azure cloud computing unit. Revenue in the cloud division rose 39% in the final quarter of 2025. Management said the cloud growth could have been in the mid-40% range if the company had allocated all of its AI microchips to Azure.
Is MSFT Stock a Buy?
Microsoft’s stock has a consensus Strong Buy rating among 36 Wall Street analysts. That rating is based on 33 Buy and three Hold recommendations issued in the last three months. The average MSFT price target of $586.30 implies 58% upside from current levels.
