After a strong 2025, technology stocks have witnessed a jittery start to 2026. The key factor driving tech stocks lower is a fear of artificial intelligence (AI) related disruption. For example, IBM (IBM) stock had its worst single-day fall in 25 years as Anthropic launched an AI tool to modernize COBOL code.
The company in this discussion, however, is another tech giant: Microsoft (MSFT). Year-to-date (YTD), MSFT stock has declined by 17%. This correction seems like a good opportunity to accumulate. After all, Microsoft director Stanton John certainly finds value at current levels, as he recently purchased 5,000 shares at an average price of $397.35 per share.
Considering Microsoft’s fundamental strength, growth from Azure Cloud, and sustained growth in Microsoft Copilot users, MSFT stock is worth considering here. Let's take a closer look.
About Microsoft Stock
Headquartered in Redmond, Washington, Microsoft is a tech giant that commands a market valuation of $2.88 trillion. As a provider of software, services, devices, and solutions, Microsoft operates through three segments: Productivity and Business Processes, Intelligent Cloud, and Personal Computing.
Microsoft holds a 27% stake in Open AI through an October 2025 deal. As a part of the deal, OpenAI will share about 20% of its revenue with Microsoft until 2032.
For the second quarter of fiscal 2026, Microsoft reported a healthy 17% year-over-year (YOY) growth in revenue to $81.3 billion. The highlight of the quarter was a 39% growth in Azure and other cloud services.
While growth has been healthy coupled with robust cash flows, MSFT stock has corrected by almost 21% in the last six months. A major part of the correction has come in the last few weeks, with the markets unnerved by the pace of developments in the AI world and its impact on traditional tech giants.
Strong Business Momentum
Significant capex related to building AI infrastructure has been a concern for investors. However, it’s important to note that Evercore believes that Microsoft will be the lone "Magnficent Seven" hyperscaler to increase free cash flow in 2026. This is indicative that the firm's underlying business momentum is likely to remain strong this year.
A key factor that’s likely to ensure robust growth momentum is the cloud business. According to CFO Amy Hood, Microsoft continues to see “strong demand across workloads, customer segments, and geographic regions, and demand continues to exceed available supply.”
For Q3 2026, the company has guided for 37% to 38% growth in Azure and other cloud services revenue. At the same time, the productivity and business process segment is expected to grow in the range of 13% to 14% for Q3. This is likely to be driven by growth in Microsoft 365 consumer cloud revenue and Dynamics 365 revenue. Therefore, two business segments are supporting overall growth and cash flow upside.
Amidst this growth, Microsoft has witnessed an increase in quarterly capital expenditures to $37.5 billion in Q2 2026 from $22.6 billion in Q2 2025. The key factor driving capex is the support of consumer demand for cloud and AI offerings. At the same time, the product teams have been accelerating research and development spend. Considering these factors, Microsoft looks attractive from a medium- to long-term perspective.
What Do Analysts Say About MSFT Stock?
Based on 50 analysts with coverage, MSFT stock is a consensus “Strong Buy.” While 41 analysts assign a “Strong Buy” rating to MSFT, four analysts have a “Moderate Buy" rating and five analysts believe that the stock is a “Hold.”
Analysts have a mean price target of $595.60, implying about 49% potential upside from here. Further, the most bullish price target of $678 suggests that MSFT stock could rise as much as 69% from current levels.
While Microsoft stock has witnessed a steep correction, the overall view remains bullish. Recently, Citi reiterated a “Buy” rating for MSFT stock, noting the momentum of Copilot and Azure's strength. The positive outlook for Microsoft is underscored by the fact that it trades at an attractive forward price-to-earnings ratio of 23.48 times. The annual dividend of $3.64 only adds to the attractiveness.
On the date of publication, Faisal Humayun Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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