TLDR
- MSFT shares have declined approximately 29% from the October 2025 peak of $542.07, falling over 20% in 2026 alone.
- Recent KeyBanc research surveying IT resellers shows positive sentiment toward Microsoft’s Copilot AI, Azure cloud platform, and security offerings.
- Production deployment of Copilot jumped 14 percentage points from Q4, with approximately 50% of resellers now actively using the AI tool.
- Fiscal Q2 results showed 17% revenue expansion and 39% Azure growth, alongside $625 billion in commercial backlog commitments.
- KeyBanc reaffirms Overweight rating with $600 target; shares currently trade around 20x forward earnings estimates.
The tech giant has faced significant headwinds entering 2026. Shares have retreated more than 20% since the year began, caught in a crossfire of investor anxiety over AI’s impact on legacy software businesses and uncertainty surrounding returns from massive cloud infrastructure investments. As a company positioned squarely in the middle of both narratives, the downturn has been particularly pronounced.
Shares reached a record closing price of $542.07 on October 28, 2025. By Tuesday’s market close, the stock had retreated 29% from that zenith. During Tuesday’s premarket session, shares edged higher by approximately 0.9% to $396.50.
Reseller Data Challenges AI Cannibalization Narrative
In a recent report, KeyBanc analyst Eric Heath shared findings from a comprehensive survey of value-added resellers — intermediaries that package and distribute technology solutions. The responses painted an encouraging picture for Microsoft, with strong marks across Copilot, Azure infrastructure, and security product lines.
The most striking data point: roughly 50% of surveyed resellers have implemented Copilot in live production environments. This represents a 14-point increase from the fourth quarter. Additionally, Microsoft topped the rankings when resellers were asked about AI workload security adoption.
KeybBanc maintained its Overweight recommendation alongside a $600 price objective — representing approximately 50% upside from current trading levels.
The survey findings counter the prevailing narrative that artificial intelligence is cannibalizing Microsoft’s core business. Instead, the evidence points toward accelerating Copilot momentum across the channel.
Solid Fundamentals Meet Market Skepticism
The underlying business performance remains robust. Microsoft delivered $81.3 billion in fiscal Q2 revenue — a 17% year-over-year increase. Adjusted earnings per share reached $4.14, climbing 24%. The Azure cloud platform stood out with 39% revenue growth.
The company also maintains one of the industry’s most substantial committed backlogs. Commercial remaining performance obligations stand at $625 billion, recently expanded through a restructured agreement with OpenAI that contributed $250 billion in long-term commitments. Microsoft retains a stake exceeding 25% in OpenAI while securing intellectual property rights to its AI models through 2032.
Yet despite these fundamentals, MSFT trades at approximately 20x forward earnings based on fiscal 2027 projections. By historical standards for a franchise of this caliber, that multiple appears reasonable.
One persistent challenge: compared to competitors like Alphabet and Amazon, Microsoft has moved more cautiously in developing proprietary silicon for cloud operations. This gap could create a modest competitive disadvantage for Azure over time.
The Office 365 ecosystem continues to maintain strong enterprise entrenchment. Migration barriers remain substantial, with integrated security capabilities and workflow dependencies making platforms like Google Workspace difficult alternatives.
Barron’s featured Microsoft as a stock selection last month when shares traded near $402.
