Microsoft’s stock plummeted 23% in the first quarter, its worst performance since the 2008 financial crisis. The company is struggling to grow efficiently in artificial intelligence (AI) and build out its cloud AI infrastructure to support soaring demand.
Despite being dominant in workplace productivity software and Windows operating systems, Microsoft faces twin pressures to grow efficiently in AI while also investing in cloud AI infrastructure. Oil prices are surging due to the Iran war, potentially driving up costs for building and running data centers.
Microsoft’s Copilot AI assistant has yet to show traction, with users flocking to competitive services from Google, OpenAI, and Anthropic. Analysts say the company needs to use valuable capacity from its Azure cloud to fix Copilot but has no choice since it’s needed to maintain momentum in its most profitable segment.
Meanwhile, software stocks are getting pummeled as part of an AI-inspired “SaaSpocalypse” that has pushed names like Adobe, Atlassian, and ServiceNow down more than 30% this year. Analysts recommend buying Microsoft shares, citing the company’s revenue growth and pricing power with Office subscriptions.
However, Microsoft’s fortunes are tied to its ability to build a successful Copilot business. The company has tasked former Snap executive Jacob Andreou with leading the Copilot experience for consumers and commercial clients after Mustafa Suleyman, the former co-founder of AI lab DeepMind, was “demoted” from running Copilot development.
Microsoft is still getting healthy growth out of Azure, which is second to Amazon Web Services in cloud infrastructure. The company’s commercial remaining performance obligations at Azure more than doubled in the December quarter, and its CEO Satya Nadella has been promoting the company’s AI enhancements on social media.
Source: https://www.cnbc.com/2026/03/31/microsofts-stock-closes-worst-quarter-since-2008-financial-crisis.html