Microsoft has had a rough start to 2026. The stock is sitting more than 20% lower year to date, punished by two of the market’s biggest fears — whether AI will eat into traditional software revenue, and whether cloud infrastructure spending will actually pay off. For a company that sits right at the center of both debates, the sell-off has been steep.
The stock hit an all-time closing high of $542.07 on October 28, 2025. As of Tuesday’s close, it was down 29% from that peak. In premarket trading Tuesday, it was up around 0.9% to $396.50.
KeyBanc analyst Eric Heath surveyed dozens of value-added resellers — companies that customize and resell third-party products — and the results were broadly positive for Microsoft. Copilot, Azure, and cybersecurity products all came out favorably.
Most eye-catching: nearly half of resellers have now rolled Copilot into production. That’s up 14 percentage points from Q4. Microsoft also led the pack in responses for highest adoption in securing AI workloads.
KeyBanc kept its Overweight rating and $600 price target on the stock. That’s a roughly 50% premium to where it’s trading now.
The survey pushes back on the idea that AI is eating Microsoft’s lunch. If anything, the data suggests Copilot is gaining ground — not losing it.
The financials haven’t actually been bad. In fiscal Q2, Microsoft posted $81.3 billion in revenue — up 17% year over year. Adjusted EPS came in at $4.14, a 24% jump. Azure was the standout, with revenue growing 39%.
The company also has one of the largest backlogs in cloud. Its commercial remaining performance obligations total $625 billion, boosted by a restructured deal with OpenAI that added $250 billion in commitments. Microsoft still holds a 25%-plus stake in OpenAI and holds IP rights to its models through 2032.
Despite that, Microsoft trades at roughly 20x forward earnings on fiscal 2027 estimates. That’s not expensive by historical standards for a company of this quality.
One lingering concern: unlike Alphabet and Amazon, Microsoft has been slower to develop custom chips for its cloud infrastructure. That puts Azure at a mild structural disadvantage in the long run.
Microsoft’s 365 suite remains deeply embedded in enterprise workflows. Switching costs are high, security features are layered in, and even cheaper alternatives like Google Workspace haven’t made a serious dent.
Microsoft was named a Barron’s stock pick last month when it was trading around $402.
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