Earnings Dip in MSFT: Oversold Setup for Recovery

Unsubscribe

Refund From 1933: Trump’s Reset May Create Instant Wealth (From American Hartford Gold)

Microsoft Drops After Earnings—Why the Bull Case Holds

Written by Chris Markoch on January 29, 2026 

Microsoft logo on a declining stock chart, suggesting a selloff.

Key Takeaways

  • Microsoft stock plunged after earnings despite beating estimates, as investors reacted to heavy AI infrastructure spending.
  • Azure’s 39% growth and continued demand signal Microsoft is investing aggressively to secure long-term leadership.
  • Analysts still see roughly 40% upside, suggesting the sell-off may be a buying opportunity rather than a trend reversal.

Microsoft Corp. (NASDAQ: MSFT) was one of the first “Magnificent 7” stocks to report earnings this season. Despite beating on the top and bottom lines, concerns about the return on investment from Microsoft’s robust capital expenditures (CapEx) plans have sent the stock plummeting.

In fact, MSFT stock was down about 11% in midday trading on Jan. 29, the day after the report. That was the largest intraday loss since March 16, 2020—a wild reversal of fortunes for a stock that was trading at an all-time high (ATH) just three months prior to the earnings report.

Microsoft reported earnings per share (EPS) of $4.14 on revenue of $81.27 billion. Both numbers were higher than expectations for EPS of $3.86 on revenue of $80.28 billion. However, investors believe that much of Microsoft’s growth is already reflected in the stock price. Even year-over-year (YOY) growth of 39% in its Azure cloud computing business wasn’t good enough to spark a rally.

Elon Warns “America Is Broke”. Trump’s Plan Inside. (Ad)

For the everyday American who’s worked hard to build their nest egg, Trump preserved a IRS loophole that allows you to protect your retirement savings before billions in American wealth are lost. 

Download Your Free 2026 Wealth Protection Guide and execute the simple steps to protect your future.GET THE FREE GUIDE

Microsoft Is Playing a Long Game

Microsoft and other hyperscalers have become the poster children for the “AI bubble” narrative. Companies like Microsoft, Meta Platforms Inc. (NASDAQ: META) and Amazon.com Inc. (NASDAQ: AMZN) are spending billions to build data centers to house the servers, chips, and other pieces of infrastructure needed to meet demand from artificial intelligence (AI).

The concern is that the AI applications at the top of the AI stack may never develop as expected. If that’s the case, then all this spending will prove to be an unnecessary drag on corporate profits for these technology stocks. 

What gets lost in this “circular debate” about circular financing and future growth is that Microsoft is playing a long game. And it’s telling investors exactly what the likely outcome will be.

The company is committing to its current and future capital expenditure spending for one reason. It can’t build fast enough to meet demand.

That’s a similar story to the one investors are hearing from companies like NVIDIA Corp. (NASDAQ: NVDA) and Broadcom Inc. (NASDAQ: AVGO). 

The takeaway is that MSFT stock may look very different for traders and investors. Traders have likely already positioned for earnings volatility and the institutional reaction that follows.

But for investors, this does not seem like a time to panic.

Analysts Are Still Bullish on MSFT Stock

The day after earnings, the headlines say analysts are lowering their price targets for MSFT stock.

That’s true, but context matters. In many cases, the revised targets are still well above the Street’s consensus price target of $597.41, which implies about 40% upside from the stock’s price as of this writing.

That doesn’t guarantee a 40% return. But it suggests Wall Street still sees meaningful upside even after trimming expectations. In that light, the earnings sell-off looks more like a timing issue than a broken thesis.

Buy. Hold. Relax. These 10 Stocks Could Build Your 2030 Wealth (Ad)

Tired of chasing the market every week? Our new free report reveals 10 U.S. stocks you can confidently buy now and hold long term — handpicked by a veteran investor with over 20 years of experience and backed by deep research into megatrends like AI, EVs, and cloud tech.Click here to get the 10 Stocks to Buy and Hold — free for a limited time

MSFT Stock Drop Is More Likely a Pause Than a Reversal

MSFT stock chart flashing oversold signals after a post-earnings slide.

In midday trading the day after the earnings report, MSFT stock showed signs that the sell-off was abating. Having said that, timing a stock’s reversal is tricky in any environment, and especially after a market-moving event, like the company’s earnings report.

That means that Microsoft may still have further to fall. However, MSFT stock was up approximately 10% in the five trading days prior to earnings. The sell-off has erased those gains and pushed the stock down to levels not seen since May 2025.

That’s where the opportunity may lie. Microsoft stock is now flashing strong oversold signals. That supports the idea that the price actionfollowing the report is more of a pause to the recovery than a reversal.

Read this article online ›

Recommended Stories

MarketBeat All Access is the premier all-in-one stock research solution that helps you identify the best stocks, monitor your portfolio, and keep track of the market.

Did you like this article?

I liked this article.
I did not like this article.

Thank you for subscribing to MarketBeat!

MarketBeat empowers individual investors to make better investment decisions by offering real-time financial information and objective market research.

If you need assistance with your newsletter, feel free to contact MarketBeat’s South Dakota based support team at contact@marketbeat.com.

If you would like to unsubscribe or change which emails you receive, you can manage your mailing preferences or unsubscribe from these emails.

Copyright 2006-2026 MarketBeat Media, LLC. 
345 N Reid Pl., Sixth Floor, Sioux Falls, South Dakota 57103-7078. USA..

Featured Link: Before Tomorrow’s Open: 3 Quiet Setups You Should Review (Click to Opt-In)

Unknown's avatar

Published by RJ Hamster

I was born on 6 August 1956 in San Francisco, California to Janet and (the late) Richard Hovis. I grew up in Santa Monica, California where I attended elementary, junior high school, and high school (graduating in 1974), in addition to involvement in sports and recreation (Little League +, the Boy’s Club ++). Further, it was in elementary school – St. Augustine’s By-the -Sea Parish School that I found, and made the choice to truly journey with God. I attended Arizona State University from 1974 to 1977 – seeking to become an architect, however, I was not accepted, and, as such, I graduated with a Liberal Arts degree. Upon graduation from Arizona State University, I attended Cal Poly San Luis Obispo and studied City and Regional Planning at the Master’s level. I successfully completed one (1) year in a two (2) year program – I did not complete the Master’s degree in City and Regional Planning – due to personal reasons. I returned to Santa Monica where I started (October 1979) my career as graphic designer with Exxon Company, USA. I spent five years with Exxon Company, USA. While working with Exxon Company, USA I was accepted into architectural school – Sci-Arc in Southern California, however, I did not attend preferring to stay with Exxon.. In 1982 I married Laura Flosi and in April 1983 we had our one and only child – Lauren Alain Hovis – a gift from God. We moved to Phoenix, Arizona in 1984 from Los Angeles, where I went to work as a graphic designer with Kitchell CEM (from 1985 -1987). From 1987 – 1995 I was an independent contractor, and a registered representative in mortgage finance, financial management, graphic design, and drafting. Further, I attended the University of Phoenix and successfully obtained a Master’s in Business Administration (MBA) in 1982. I was also a member of the Scottsdale Jaycees, where I became very involved in community events and projects. In 1994, I accepted a cartography position with the Defense Mapping Agency in Reston, Virginia. As such, I relocated from Phoenix to Reston. In 1998, I was accepted and worked as a Visual Information Officer with the Central Intelligence Agency. In 2002, I worked as a Support Officer until my retirement (due to a need for shoulder surgery) in September 2018. Away from my Federal Government service, I have been involved in various organizations and activities in Northern Virginia. In November of 2011, I married Rebecca Ouellette in Santa Monica, California. I reside in San Tan Valley, AZ with my two hamster - Jess and Timothy, our fish, our lizard - RJ Lizard., and our cats - Pearl and Grey. As to hobbies, I enjoy playing sports, attending sporting events, mentoring individuals from financial management to hamsters, building models, photography, travel, multimedia design, managing partner for RJ Hamster, and jazz – smooth jazz to a samba or a bossa nova. Love and God Bless, Peter – aka RJ Hamster Jo hi

Leave a Comment