Microsoft’s stock price closed at $410.68 on Friday, March 6, 2026, following a volatile week marked by a nearly 10% single-day loss on Wednesday after the release of its fiscal Q2 2026 earnings report. The decline, the largest since 2020, came despite the company reporting revenue and earnings that exceeded analyst expectations.
Microsoft reported revenues of $81.3 billion, a 17% year-over-year increase, surpassing the consensus estimate of $80.27 billion. Non-GAAP earnings per share reached $4.14, also exceeding expectations of $3.97. A significant driver of the results was substantial investment in artificial intelligence infrastructure, with capital expenditures surging 66% to $37.5 billion as Microsoft expands capacity for generative AI services, including custom Maia and Cobalt chips.
The company’s Intelligent Cloud segment led growth, with revenue rising 29% to $32.9 billion. Azure and other cloud services revenue grew 39%, driven by demand for AI-enabled infrastructure. Although, this growth rate represents a slight moderation from the 40% reported in the previous quarter. Productivity and Business Processes revenue increased 16% to $34.1 billion, fueled by a 17% increase in Microsoft 365 Commercial cloud revenue and a 29% surge in Consumer cloud revenue. Dynamics 365 also saw growth, increasing 19% as AI “agents” are integrated into business workflows through platforms like Agent 365.
The More Personal Computing segment experienced a 3% decrease in revenue to $14.3 billion. Windows OEM revenue showed resilience with 5% growth, aided by the approaching end-of-support for Windows 10. However, this was offset by a 32% drop in Xbox hardware sales, reflecting a cooling global console market.
Microsoft’s cloud revenues surpassed $50 billion in the December quarter for the first time. CEO Satya Nadella stated that the company is “in the beginning phases of AI diffusion and its broad GDP impact,” anticipating substantial growth in the total addressable market as AI adoption accelerates. He added that the company’s AI business is already larger than some of its established franchises that took decades to build.
Looking ahead to the third quarter of fiscal 2026, Microsoft anticipates revenue between $80.65 billion and $81.75 billion, representing a growth rate of 15–17%. Azure revenue growth is expected to remain strong, at approximately 37–38% in constant currency. CFO Amy Hood indicated that Microsoft Cloud gross margins should remain around 65%, as efficiency gains from custom silicon and “tokens per watt” optimizations offset the cost of GPU procurement.
Despite the stock’s decline, Wall Street analysts largely maintained a bullish outlook, though many lowered their target prices. Morgan Stanley’s Keith Weiss suggested the market was focusing on hardware constraints rather than customer demand, noting that prioritizing internal AI needs, like Copilot, over external Azure customers limited reported growth. Evercore’s Kirk Materne echoed this sentiment, stating the issue is “no longer about demand; it is about capacity timing.”
Dan Ives of Wedbush Securities lowered his target price from $625 to $575, but reiterated a positive outlook, stating the company is “capitalizing on the heightened momentum seen in the AI Revolution” and that the price weakness presents a buying opportunity. JPMorgan also lowered its target price, from $575 to $550, while maintaining an outperform rating, citing a “solid demand picture” tempered by softness in Gaming and Search and CPU/GPU capacity constraints in Azure.
Goldman Sachs lowered its target price from $655 to $600, citing concerns about higher-than-expected capital expenditures without a commensurate increase in Azure growth. KeyBanc also reduced its target price, from $630 to $600, acknowledging short-term pain but awaiting confirmation of long-term gains. Hargreaves Lansdown’s Matt Britzman expects AI to drive long-term growth, noting that demand for AI is exceeding Microsoft’s ability to build capacity.
Microsoft disclosed a commercial remaining performance obligation (RPO) of $625 billion, but a significant portion – 45% – is attributed to OpenAI. Jefferies analyst Brent Thill, speaking with CNBC, expressed concern about OpenAI’s ability to meet its financial obligations to Microsoft and other providers.
