Investors Dump Microsoft Shares Despite Largest Earnings Beat in Company History
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Microsoft (MSFT) shares have fallen below $400 despite their biggest gain ever. Investors are demanding that AI spending creates sustainable margins.
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Microsoft shares are down 17.46% this year despite a 47% operating margin and 26% cloud revenue growth.
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Google is down just 1.2% this year by integrating AI into existing products. NVIDIA held firm, selling infrastructure without promising future returns.
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Microsoft, one of the biggest names in the technology world (NASDAQ:MSFT) shares fell below $400 despite setting the record for the biggest earnings in the company’s history; Investors question whether the company’s massive AI infrastructure spending will translate into profitable product adoption. The stock has lost nearly a fifth of its value this year as investors shift away from AI infrastructure plays to companies that make real product money. Retail investor sentiment on Reddit remains neutral at 51.88, reflecting this confusion.
The disconnect underscores Wall Street’s anxiety about making money from AI, as Microsoft posted record operating margins of over 47% and grew cloud revenue by double digits (26% year-on-year), but shares collapsed from their peak as Wall Street demanded evidence that big AI spending is translating into sustainable margins rather than just revenue growth. The market does not question Microsoft’s operational excellence; It demands evidence that AI spending delivers sustainable returns, not just revenue growth. Despite returning billions of dollars to shareholders and generating record quarterly revenue, the market is punishing Microsoft for failing to show that its AI infrastructure spending will generate sustainable returns.
Despite record profits and strong cloud revenue in Q2 2026, Microsoft’s stock performance is impacted by market concern about sustainable AI margins against large AI spending, reflected by a neutral social sentiment.
The most engaged post on r/stocks captured the tension perfectly, with 407 upvotes and 386 comments. The author of this highly-engaged Reddit post argued that Microsoft’s more than 1.5 billion Windows devices give Copilot a unique distribution advantage, and that current product weaknesses reflect initial criticism of Google’s Bard before Google doubled its stock.
Why are people so pessimistic about MSFT?
In stock by u/HexadecimalCowboy
“Microsoft has more than 1.5 billion Windows devices, and Copilot is integrated into all of them. This gives Microsoft a unique deployment advantage that no other AI company can replicate,” the post’s author wrote. They also suggested that current skepticism reflects early criticism of Google’s Bard, noting that “people said the same thing about Bard being inferior to ChatGPT, but after they showed AI integration in their product suite, Google’s shares doubled.”
