Microsoft’s stock closed out at its worst calendar quarter in almost 2 decades. The tech giant lost almost a quarter of its market value, between January and March—a decline which has not been seen since 2008’s financial crisis depths. While the organization’s underlying business is reportedly profitable, investor anxiety and the huge spending of the organization on AI has shaken the confidence in one of the most valuable companies in the world. In short, Microsoft shares continue to crash as people start losing confidence.
Microsoft sees its biggest decline in over 2 decades
The selloff’s scale is striking, with Microsoft’s shares dropping around 25% in 2026’s first quarter. Social media to this news offered a brutal reaction, with the critics even coining the term “Slop co.” for describing what they see to be rushed and unfocused artificial intelligence strategy. A user on X directly addressed the leadership of Microsoft, expressing a hope that this financial hit will force the company towards simplicity of its operating systems, like Windows 7 or 10.
While the reports suggest such a big hit, Microsoft’s filings, though, tell quite a complex story. As per SEC documents, Microsoft’s fiscal second-quarter revenue jumped 17% to $81.3 billion. The Intelligent Cloud segment also showed a surge of 29%. The sharp reaction of the market was not driven by the sales collapse but by the huge $37.5 billion capital expenditure of the company. It surpassed Microsoft’s operating cash flow. Now, the investors are looking at numbers and seeing business pouring cash into AI infrastructure, way faster than it could generate returns, creating a major tension.
Microsoft’s heavy spending on AI is meeting market skepticism
The core issue that is fueling this downturn is the disconnect between Microsoft’s spending and Wall Street’s patience. The company is being said to be on track to invest $146 billion (roughly) in infrastructure in 2026. It is almost double the spending of the previous year. It has put Microsoft at larger tech sector debates’ center—when will massive investment within AI start paying off in a meaningful manner or will it just be excessive AI bloat?
Both investors and analysts are now worried about a shift within the competitive landscape. There remains an increased concern that the AI startups, including Anthropic and OpenAI, can eventually offer agents that would bypass traditional software of Microsoft. It will threaten the organization’s core productivity business, while it continues destroying user experience.
Some portfolio managers noted that customers might choose to go directly to the AI vendors instead of choosing to pay Microsoft. It will put pressure on the organization’s margin. Despite the selloff, some analysts just look for value—many are pointing out that the stock is now trading at its lowest multiple since 2016’s value. Also, the path forward is clouded by questions like whether this AI bet of Microsoft will ultimately pay off.
