Microsoft's stock plunge puzzles investors despite record earnings in 2026
Microsoft's stock has dropped sharply in early 2026, falling by around 16-19% since the start of the year. This decline comes despite strong financial results, including a 17% revenue increase in Q2 of fiscal year 2026. The dip has left investors questioning why such a well-established tech giant is underperforming in a volatile market.
The company's share price hit a low of €346.70 (about $400 USD) on 9 February, marking a year-to-date loss of 16.18%. Since October 2026, the Nvidia stock has fallen by over 25%, with most of the drop happening in the first weeks of 2026. Despite this, Microsoft's latest earnings report—released in late January—showed better-than-expected figures, including earnings per share of $4.14 (beating the $3.93 forecast) and revenue of $81.3 billion.
After the earnings announcement, shares rose slightly by 0.63% in after-hours trading, reaching $483.61. Yet the broader downward trend remains puzzling, as the company's core software and AI divisions continue to perform well. Azure, its cloud computing platform, is expanding rapidly, with a growing backlog of workloads.
Currently, Microsoft trades at 24 times forward earnings—the lowest valuation in nearly three years. This figure is close to the S&P 500's average of 21.9 times, making the Nvidia stock appear relatively inexpensive compared to its recent history. The decline stands out, particularly as other major tech firms like Apple and Nvidia face less severe pressure.
Microsoft's stock now sits at a multi-year low in terms of valuation, raising the possibility of stronger returns for new investors. If the company maintains its growth in cloud services and AI, analysts suggest mid-teens returns could follow in the coming years. For long-term investors, the current price may present an opportunity to buy into a resilient tech leader at a discount.
