Those who owned Microsoft's stock for the free-cash-flow profile now 'are being asked to underwrite a capital-intensity cycle,' says one analyst

Shares of Microsoft are down more than 21% so far this month.

Microsoft's stock is having its worst month since 2000, and it's tracking toward one of its worst annual performances on record, exemplifying a broader rotation out of the "Magnificent Seven."

Shares of Microsoft $(MSFT)$ closed down 3.5% on Thursday, and the stock ranks 485th out of 503 in the S&P 500 SPX in terms of performance on a month-to-date basis, according to Dow Jones Market Data. It's down 21.6% over the course of the month so far, in what could be its worst-ever June performance.

Microsoft's stock is the weakest performer in the "Magnificent Seven" on a month-to-date basis, but all seven of those major tech stocks are in the red for June so far.

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On Tuesday, the Roundhill Magnificent Seven ETF MAGS, which tracks the grouping, fell into correction territory - defined as a drop of at least 10% from a recent peak.

Benchmark analyst Yi Fu Lee told MarketWatch that Microsoft's stock pressure relates to that broader weakness. There's been a general trend of profit-taking, he said, as investors are digesting the magnitude and timing of returns on elevated artificial-intelligence spending.

Alphabet, Amazon, Meta and Microsoft alone are on track to spend a combined $700 billion on their AI businesses this year.

"But Microsoft has an added layer," noted Ishan Majumdar of Baptista Research. "With capex guidance now approaching $190 billion for FY2026 (up over 60% year over year) and free cash flow down roughly 10%, the market is repricing the stock from a cash-flow compounder to a heavy-infrastructure story."

He added that investors who held positions in Microsoft thinking it was a free-cash-flow play now "are being asked to underwrite a capital-intensity cycle they didn't sign up for."

Yet Lee noted that Microsoft remains "solidly free-cash-flow positive," reinforcing that the company is "building for long-term growth" as opposed to reacting to demand uncertainty in the near term.

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He said that Microsoft remains one of the "highest quality ways" to gain exposure to artificial intelligence and views the stock's recent weakness as a buying opportunity for investors.

Majumdar agreed that the "fundamentals remain intact."

"At around 22x forward earnings versus a sector median of 32x, the valuation gap is hard to ignore," he said. "I feel that the current selloff looks more like a repricing of the path to returns rather than a verdict on the business itself."

-Hannah Pedone

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June 25, 2026 16:51 ET (20:51 GMT)

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