Since its earliest beginnings, Microsoft (MSFT) has positioned itself at the center of technological transformation, and innovations like MS-DOS, Microsoft Office, subscription software models, and Azure cloud infrastructure have created significant wealth for investors.
According to Fortune, if you had invested $1,000 at the time of Microsoft’s IPO in 1986, you’d be sitting on roughly $5.5 million today.
But despite Microsoft’s consistently strong earnings, double-digit growth, and massive cash flow, its future as a sure-fire investment is no longer written in stone, due to increased competition and its enormous bets on artificial intelligence (AI).
Microsoft is spending staggering amounts — $190 billion in 2026 alone — on AI data centers, chips, networking, and cloud capacity, which has simultaneously impressed, excited, and unnerved Wall Street.
This concern shows in MSFT’s performance: As of May 2026, Microsoft’s shares are down approximately 13% year to date; however, its earnings don’t reflect a company in decline.
Many long-term investors see the stock’s consolidation as a buying opportunity, though they must now assume greater risk.
Here’s everything you need to know before you invest in MSFT this year.
@microsoftlearn If you’ve been thinking about building an AI agent this is your sign.
What’s going on with Microsoft in 2026?
Continuous evolution has always been a core part of Microsoft’s strategy, and right now the company sits at the center of two of the most powerful forces in tech: cloud computing and AI.
And while investors are always impatient to see ROI, Microsoft’s recent financial results prove these forces are generating momentum. In its fiscal third quarter of 2026, MSFT reported record revenue of $54.1 billion, a 29% year-over-year increase.
Its AI business surpassed $37 billion in annual revenue, up 123% year over year.
Azure and other cloud services grew 40%, driven by AI demand, and sales and income exceeded analyst expectations.
“We are at the beginning of one of the most consequential platform shifts,” Chairman and CEO Satya Nadella said, adding, “We are also hard at work changing the way we work.”
But the company’s earnings also revealed why investors remain nervous. Microsoft is spending staggering amounts on its AI infrastructure, at $190 billion in 2026 ($25 billion of which is due to higher component prices), which caused the company’s quarterly operating expenses to shoot up 9%.
And while Microsoft has integrated its suite of Copilot AI tools into Windows, Microsoft 365, Teams, GitHub, and Azure, it has struggled to convert these tools’ users into paying AI customers, reporting just 20 million paid Copilot subscribers in the quarter.
In total, Microsoft has more than 1.4 billion active Windows users, meaning only 3–4% of them are actually paying for the premium version of the company’s AI assistant.
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In addition, Microsoft’s AI investments have come at a very human cost. The company slashed 15,000 jobs in 2025, according to Yahoo! Finance, which cited a memo from Xbox Executive Phil Spencer, who said that the workforce reduction was a “necessary” move that would “increase agility and effectiveness” for Microsoft.
Layoffs have unfortunately become a common symptom of the AI age, and while some companies, like IBM (IBM), Duolingo (DUOL), and Klarna (KLAR) cite machine learning as a direct replacement for human workers, others, like Meta Platforms (META), Oracle (ORCL), and Microsoft, are using workforce reductions to free up more capital for AI investments.
It appears the job cuts will continue for Microsoft workers in 2026. On the earnings call, Chief Financial Officer Amy Hood stated that, as “we continue to evolve how we operate to increase our pace and agility … we expect headcount will decrease year-over-year.”
What happened with Microsoft and OpenAI?
Microsoft’s unwinding relationship with OpenAI makes its 2026 narrative even more complicated. On April 27, 2026, MSFT announced that it would no longer be the AI platform’s exclusive partner, freeing OpenAI to work with other companies such as Amazon (AMZN) and Alphabet (GOOG).
Since 2019, when Microsoft invested $1 billion in OpenAI’s newly formed for-profit business, Microsoft served as the sole distributor of OpenAI’s technology, which was restricted to running only on the Azure cloud platform.
Related: Where is Microsoft’s headquarters? Inside the tech giant’s corporate campus
Nadella himself stepped in and mediated when OpenAI’s CEO, Sam Altman, was briefly ousted from the company in 2023 due to internal board conflicts.
But the companies’ relationship became increasingly strained in recent years because Microsoft could not keep up with OpenAI’s ever-increasing supply demands. And while the restructuring agreement does allow OpenAI to work with other cloud providers, it also gives Microsoft a 27% stake in the company, which analysts view as a net positive for Microsoft in the long run.
Is MSFT a good buy now?
They say that fortune favors the bold, and in Nadella’s 12-year tenure as the head of Microsoft, he’s not only helped turn the company around; he’s transformed it into a $3 trillion powerhouse and a leader in cloud computing.
AI is his next frontier, and he is aligning Microsoft accordingly, most analysts believe. A survey by 24/7 Wall Street recently found that 55 of 58 analysts rated MSFT a “Buy” or “Strong Buy,” with just 3 “Holds” and no “Sell” ratings, and consensus price targets indicated significant upside from current levels.
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According to Seeking Alpha, the fact that Microsoft is now trading at a lower earnings multiple than it did during the cloud era “doesn’t make any sense.”
This could be investors’ chance to buy the tech giant at a relative discount. After all, when the Federal Reserve Bank of Richmond states that AI investments are now a larger contributor to the economy than consumer spending, accounting for nearly 92% of GDP growth in the first half of 2025, it seems to indicate the AI sector remains a growth opportunity. The massive AI investments companies like Microsoft are making may end up delivering substantial returns — sooner or later.
