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Additional Reading from MarketBeat Microsoft Slumps Heading Into Earnings—Here's What Matters MostSubmitted by Chris Markoch. Publication Date: 1/23/2026. 
Key Takeaways - Microsoft stock remains under pressure as a bearish death cross pattern lingers ahead of the company’s Jan. 28 earnings report.
- Investors should focus on Azure growth, AI monetization, and capital spending to assess whether Microsoft’s heavy AI investments are paying off.
- MSFT valuation has become more attractive after the pullback, reinforcing the stock’s appeal as a long-term buy despite near-term technical weakness.
Microsoft Corporation (NASDAQ: MSFT) stock remains in the three-month slide that began after the company's last earnings report. With only a few days before earnings, MSFT has yet to break out of the bearish death cross pattern that formed in November 2025. The former CEO of Google calls it the most important thing to happen in 500, maybe 1,000 years of human society. A former U.S. Treasury Secretary says when your great-grandchildren write the history of this period, the political headlines will be the second or third story. The first story is something none of us have seen before. The dot-com collapse, global financial crisis, and COVID-19 pandemic don't compare to what's coming next. We may be entering a period of dramatic, almost unimaginable change. See the full warning and how to prepare now. It could be heading for a double dip — what does that mean for investors as Microsoft prepares to report earnings on Jan. 28? A death cross occurs when a stock's short-term simple moving average (typically the 50-day SMA) crosses below a longer-term SMA (typically the 200-day). It's considered bearish because it suggests both short- and long-term momentum are weakening. 
Like any technical pattern, a death cross is not infallible. For long-term investors, a subsequent golden cross can create buying opportunities in quality names. Earnings announcements in particular can trigger swift reversals. Microsoft's Next Earnings Report Hinges on Azure and AI Investors will be watching for signs that AI investments and cloud expansion are translating into tangible results. Key metrics include Azure growth — especially whether AI workloads are driving incremental revenue versus simply shifting existing demand to the cloud. Early adoption and monetization of products like Copilot and other enterprise AI tools could point to longer-term productivity gains. Capital expenditures will be closely watched. Investors want to know whether Microsoft plans to keep heavy AI-related spending on new data centers or signal a pullback. Margins matter too; the market will assess whether growth initiatives can scale without eroding profitability. Guidance tone also matters — any reassurances on steady revenue and AI adoption trends could stabilize the stock ahead of what may be a volatile quarter, even if management doesn't exceed expectations. Valuation Looks More Reasonable After the Pullback One benefit of the recent slide is that MSFT appears more reasonably valued. The trailing 12-month price-to-earnings (P/E) ratio sits around 31.5x, near the lower end of its five-year historical range and at a discount to many technology stocks trading at 35x or higher. For long-term investors, the pullback presents an opportunity to add to a core holding at a more attractive entry point. Microsoft's business is diversified across productivity software, cloud computing, and emerging AI platforms. Even if certain segments face short-term headwinds, the broader revenue mix and strong free cash flow help cushion the company from sharp declines. In short, the market appears to be pricing in a moderation of growth rather than a permanent slowdown — which may open the door for disciplined investors looking beyond the next quarter. Challenges to the Buy-and-Hold Thesis The biggest risk to holding MSFT stock centers on the debate over an AI-driven bubble. Microsoft is investing tens of billions of dollars to build out data centers, yet even the company's CEO has acknowledged that AI still has kinks to work out. The bearish case is that many companies may conclude AI does not deliver enough long-term value to justify the investments needed to support sustained data-center demand. If that happens, even a cash-rich company like Microsoft could face earnings pressure. How likely that outcome is remains uncertain. Many critiques focus on generative AI, where Microsoft is a clear leader. The next wave — agentic AI — is still in its infancy and may drive the largest productivity gains, but adoption could be less obvious because it is less consumer-facing. Microsoft Is a Stock to Own for the Long Haul MSFT remains appropriate as a core holding for many portfolios. The stock has been under pressure for several months, but the company is engaged across every major technology trend in 2026, including multiple layers of the AI stack. A sharp pullback can be unsettling, but as the saying goes, "when in doubt, zoom out." Here's the one-year price chart for MSFT: 
Now look at the five-year chart: 
Viewing a stock's performance over a wider lens helps investors understand normal volatility. In Microsoft's case, past pullbacks have often preceded higher highs, which may comfort long-term holders who can look beyond the next quarter.
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