Microsoft (MSFT) stock rose around 3% on Wednesday, July 2, to add to what has been a painful year so far.
The stock dropped 23% in the first six months of 2026 — its worst first half since 2000. June alone saw a 17% decline, the steepest monthly fall since December 2000.
But something is shifting.
Software stocks have started to benefit from a rotation out of semiconductors. The iShares Expanded Tech-Software ETF (IGV) climbed for four straight days through Wednesday, gaining 7% over the past eight trading days. The iShares Semiconductor ETF (SOXX) fell 8.5% over the same period.
Microsoft’s heavy weighting toward software, long seen as a drag this year, is now working in its favor.
The stock was up another 0.7% in premarket trading Thursday. The S&P 500 was little changed, the Dow up 0.2%, and the Nasdaq down 0.3%.
On Wednesday, consumer health company Haleon announced a new five-year agreement to expand its use of Microsoft’s AI, cloud, and data technologies across its global operations.
The deal covers Microsoft 365 Copilot, Azure cloud services, and broader AI systems. Haleon said the tools will help automate routine tasks, improve collaboration, and strengthen security.
The two companies also plan to jointly develop AI tools for consumer research, product development, and supply chain management.
Haleon said the goal is to help employees make faster decisions and get products to consumers more quickly. The company has a target of reaching one billion more consumers by 2030.
For Microsoft, it’s another large enterprise customer locking into its AI platform.
The positive news comes alongside a less welcome report. Business Insider reported that Microsoft could announce thousands of job cuts as early as next week.
The reductions are expected to affect fewer than 2.5% of Microsoft’s roughly 228,000 full-time employees — smaller than its previous round, which cut around 4% of staff.
Sales and consulting roles may be affected, in addition to previously expected cuts within Xbox.
Microsoft has not officially confirmed the layoffs. The timing aligns with the end of Microsoft’s fiscal year on June 30, when the company typically reviews budgets and staffing.
Despite the difficult start to 2026, analysts remain broadly positive. Microsoft trades at a forward price-to-earnings ratio of 21.52 times.
Revenue is expected to grow at more than twice the pace of the S&P 500 through 2028, according to MarketWatch.
TipRanks data shows 35 of 36 analysts covering Microsoft rate it a Buy, with one Hold and zero Sell ratings. The average 12-month price target is $562.10, implying roughly 38% upside from current levels.
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