Key Stats for Microsoft Stock
- Current Price: $372.97
- Target Price (Mid): ~$760
- Street Target: ~$561
- Potential Total Return: ~104%
- Annualized IRR: ~19% / year
- Earnings Reaction: -3.93% (April 29, 2026)
- Max Drawdown: 34.91% (June 25, 2026)
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What Happened?
Microsoft (MSFT) just gave investors the sharpest single-day reversal of its rough 2026. On June 26, shares closed up 5.71% at $372.97, one day after the stock hit its deepest drawdown of the year. The biggest single catalyst was not an earnings beat or a new contract. It was a famous bear placing a long-term bullish bet, alongside a broader rotation into AI software names.
That contrast is the whole story for Microsoft stock in 2026. The business is putting up some of the best cloud numbers in its history, yet the share price sits roughly 31% below its October 2025 peak. Bulls see a high-quality compounder on sale. Bears see a company spending its way into a free cash flow problem. The market still cannot agree on which read is right.
Why Microsoft Stock Jumped
The catalyst came from Michael Burry, the investor known for predicting the 2008 housing crash. On June 25, he disclosed on his Substack a new long-dated position in Microsoft through December 2028 LEAP call options, with strike prices in the low $700s. Burry said he viewed the $350 level as a good place to buy the stock but chose the options because he considered them inexpensive relative to his outlook. Notably, he bought derivatives rather than shares at the current price.
The disclosure landed as Microsoft was already near a technical floor. The stock had just printed a max drawdown of 34.91% on June 25, per TIKR data, its worst of the year. A long bet from a well-known skeptic gave nervous buyers a reason to step in. Shares opened more than 4% higher and finished up 5.71%.
The timing helped for a second reason. Money has been rotating out of AI chip names and into AI software leaders in late June, and Microsoft was a direct beneficiary. That rotation, layered on the Burry headline, turned a beaten-down stock into the day’s standout.
A Quarter That Did Not Match the Stock
The frustration for the Bulls is that the fundamentals have not been the problem. Microsoft posted a record fiscal Q3 2026 on April 29, with revenue of $82.9 billion, up 18% year-over-year. Microsoft Cloud, the company’s combined commercial cloud business, topped $54.5 billion, up 29%. Azure, its cloud computing platform, grew 40% as reported and 39% in constant currency, beating expectations as capacity came online early.
The AI business crossed a $37 billion annual recurring revenue run rate, up 123% year-over-year. CEO Satya Nadella framed it as something bigger than a product cycle. “We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as agents proliferate and become the dominant workload,” he told analysts on the call. That matters because it reframes the spending debate. If agents become the dominant enterprise workload, the infrastructure bill is an entry ticket, not an overreach.
Yet the stock fell 3.93% on the report. The reason was guidance. CFO Amy Hood confirmed the company expects roughly $190 billion in calendar 2026 capital expenditures, including about $25 billion tied to higher component pricing driven by memory costs. Free cash flow for the quarter was $15.8 billion, held down by $31.9 billion in capital spending. That single dynamic has driven most of the 2026 selloff.
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The Real Debate: Spending vs. Returns
What bulls and bears are actually fighting about is timing. Hood was direct that the payoff is coming, not here yet. She told analysts the company has over $627 billion in remaining performance obligations, its contracted backlog, up 99% year-over-year. Roughly 25% of that converts to revenue in the next 12 months. That backlog is the bull case in one number.
The shift underneath it is a pricing change. Microsoft is moving its commercial model from per-seat licenses to seats plus consumption, meaning customers pay a base license and then pay more as they use AI agents. Nadella put it plainly: “Any per user business of ours, whether it’s productivity, coding, security, will become a per user and usage business.” A seat model caps revenue at price times headcount. A usage model lets revenue per customer grow without a new sale. Nearly 60% of customer service customers already buy usage-based credits, and GitHub Copilot moved to consumption pricing on June 1.
The bear case is that none of this is free. Margins compress while the build runs, regulators are circling with an EU antitrust probe into Azure and an Italian probe into Copilot pricing, and several securities class actions filed in late June allege Microsoft overstated Copilot adoption. The question the market cannot yet answer is whether the $190 billion converts to earnings before patience runs out.
On valuation, the stock now trades at a NTM price-to-earnings of about 20x, per TIKR. That is well below its three-to-five year average in the high 20s to 30x range. Against software peers, Microsoft looks reasonably valued for its quality. It trades around 12x NTM EV/EBITDA versus the peer-group mean near 23x, and roughly 20x NTM earnings against a mean near 18x. Oracle sits cheaper at about 12x EV/EBITDA, but it does not pair that with Microsoft’s margin profile or $627 billion backlog. The discount to its own history, rather than to peers, is the sharper signal.
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TIKR Advanced Model Analysis
- Current Price: $372.97
- Target Price (Mid): ~$760
- Potential Total Return: ~104%
- Annualized IRR: ~19% / year
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Using TIKR’s mid-case scenario, which is built on consensus inputs, Microsoft is worth around $760 by mid-2030. That implies a potential total return of about 104% from today’s price, or roughly 19% per year over four years.
Two revenue drivers carry the case. The first is Azure taking enterprise cloud share as AI workloads scale against a backlog that converts over time. The second is Microsoft 365 Copilot deepening monetization as the seat-plus-consumption model matures. The mid-case assumes revenue CAGR of around 16%, consistent with TIKR consensus revenue reaching roughly $607 billion by fiscal 2030.
The margin driver is operating leverage as the build cycle peaks, with net income margin expanding to around 39% from 36% today. The primary risk is timing. Hood confirmed supply stays constrained at least through calendar 2026, so the free cash flow trough comes before the recovery.
- Upside: If usage-based pricing layers a consumption engine on top of an already massive installed base, earnings compound faster than the market expects.
- Downside: If AI spending outpaces returns and memory costs stay elevated, margins compress, and the multiple stays low.
Conclusion
The Burry headline moved the stock, but it does not settle the debate. Watch Microsoft’s next earnings report, its fiscal Q4 2026 print due in the second half of July, for two things: whether Azure growth holds near the guided 39% to 40% in constant currency, and whether free cash flow firms as component-price pressure starts to ease. Strong looks like Azure at or above guidance, with operating margins still expanding. Weak looks like another quarter of capex climbing faster than the revenue it is supposed to produce. The July print, not the June rally, is the real test.
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Should You Invest in Microsoft?
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Pull up Microsoft, and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
