Microsoft Faces Worst Quarter Since 2008 as Q1 Stock Plunges 25%
Microsoft’s stock is down 25% in Q1, on pace for its largest quarterly decline since 2008, as investors worry AI investments haven’t translated into revenue growth. Capital expenditures are projected at $146 billion in fiscal 2026, up 66% from fiscal 2025’s $88 billion, pressuring profitability.
1. Quarterly Performance
Microsoft’s share price has fallen 25% in the first quarter, marking its steepest drop since the 27% plunge in Q4 2008. The stock has underperformed its Magnificent Seven peers, with four consecutive sessions of declines as investors reassess near-term growth prospects.
2. Capital Expenditures Surge
The company plans to spend $146 billion on capital expenditures in fiscal 2026, a 66% increase from $88 billion in fiscal 2025. Planned capex is set to rise further to $170 billion in fiscal 2027 and $191 billion in fiscal 2028 to support AI infrastructure.
3. Investor Concerns and Valuation
Fears that AI startups could bypass Microsoft’s software have raised questions about future revenue and pricing power. The stock trades at under 20 times forward earnings—the cheapest valuation since June 2016 and at a discount to the S&P 500, reflecting investor skepticism.