Microsoft just had its worst quarter on Wall Street in nearly two decades — the steepest fall since the Great Recession

Microsoft conscionable saw its worst 4th connected Wall Street successful astir 2 decades — and investors are paying attention. The tech giant’s banal dropped 23% successful the archetypal 3 months of 2026, the steepest autumn since the 2008 fiscal crisis. For context, the Nasdaq fell conscionable 7% during the aforesaid three-month period.

Microsoft, agelong considered a reasonably harmless stake by investors, is abruptly looking a batch much risky. Experts accidental the causes are complex, but whitethorn stem from questions astir whether Microsoft’s AI investments volition wage off.

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“There is interest that the Microsoft 365 Copilot concern has not lived up to rather their expectations, and that’s an country that could spot caller competitors,” Kyle Levins, an expert astatine Harding Loevner, which held $219 cardinal successful Microsoft shares arsenic of December 2025, told CNBC (1).

Microsoft has heavy invested successful gathering retired AI infrastructure, betting that request for unreality computing and AI tools volition warrant the costs. But truthful far, they aren’t seeing the payoffs immoderate experts expected.

At the halfway of the interest is Copilot, the AI adjunct Microsoft baked into its Office 365 suite. Despite important fanfare, adoption has been slow. Just 3% of Copilot users wage for it (2). Microsoft claims conscionable 1% of the AI market, compared to ChatGPT’s 65% stock and Gemini’s 22% (3).

Despite those flagging numbers, Microsoft is doubling down connected AI. The institution conscionable announced a $5.5-billion concern successful unreality and AI infrastructure successful Singapore by the extremity of 2029 (4).

On the unit side, the institution has seen a drawstring of high-profile departures, including the status of gaming main Phil Spencer (5) and apical productivity person Rajesh Jha (6). Mustafa Suleyman, the DeepMind co-founder who had been starring Copilot’s user development, was besides reassigned (7).

Analyst Ben Reitzes of Melius Research summed it up bluntly: “Redmond [Microsoft’s headquarters] is successful a pickle” (1).

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It’s worthy noting that Microsoft isn’t the lone tech sanction taking a beating. A broader sell-off successful software-as-a-service (SaaS) stocks, dubbed the “SaaSpocalypse” by some, has dragged large players similar Adobe, Atlassian, and ServiceNow down much than 30% this year.