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Redmond, Washington-based Microsoft Corporation (MSFT) is a key player in the computer industry. The company develops and supports software, services, devices and solutions. With a market cap of $3 trillion, Microsoft offers applications, extra cloud storage, and advanced security solutions serving customers worldwide.
Shares of this tech giant have underperformed the broader market over the past year. MSFT has declined 1% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 20.6%. In 2025, MSFT stock is down 2.8%, compared to the SPX’s 2.5% rise on a YTD basis.
Narrowing the focus, MSFT’s underperformance looks less pronounced compared to the Technology Select Sector SPDR Fund (XLK). The exchange-traded fund has gained about 13.9% over the past year. Moreover, the ETF’s marginal gains on a YTD basis outshine the stock’s single-digit losses over the same time frame.
MSFT's underperformance can be attributed to its massive investment in AI infrastructure, which has not generated expected revenue growth. Despite spending heavily on AI, including a $14 billion investment in OpenAI, Microsoft's overall revenue and profit growth has fallen to multi-quarter lows. Additionally, constraints in meeting demand and higher depreciation expenses on AI investments have impacted profitability. DeepSeek's revelation of developing AI models at a fraction of the cost has also caused Microsoft shares to decline.
On Jan. 29, MSFT reported its Q2 results and its shares closed down more than 6% in the following trading session. Its EPS of $3.23 surpassed Wall Street expectations of $3.11. The company’s revenue was $69.6 billion, beating Wall Street forecasts of $68.7 billion.
For the current fiscal year, ending in June, analysts expect MSFT’s EPS to grow 10.8% to $13.07 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
Among the 42 analysts covering MSFT stock, the consensus is a “Strong Buy.” That’s based on 35 “Strong Buy” ratings, four “Moderate Buys,” and three “Holds.”
This configuration is more bullish than a month ago, with 34 analysts suggesting a “Strong Buy.”
On Feb. 3, Mizuho Financial Group, Inc. (MFG) analyst Gregg Moskowitz reiterated a “Buy” rating on MSFT but lowered the price target to $500, implying a potential upside of 22% from current levels.
The mean price target of $510.35 represents a 24.6% premium to MSFT’s current price levels. The Street-high price target of $600 suggests an ambitious upside potential of 46.4%.
