NEW YORK, Jan 21, 2026, 16:07 EST — After-hours
- Microsoft shares dropped roughly 2.7% in late U.S. trading, underperforming the broader tech rally
- Wall Street’s latest price-target cuts spotlight ongoing concerns over short-term cloud and AI demand
- Next week’s earnings report is drawing investor attention for clues on Azure’s growth and spending
Shares of Microsoft (MSFT.O) dropped roughly 2.7% to $442.45 in late Wednesday trading, lagging behind gains seen in the broader market and among other tech giants.
This move is crucial as Microsoft approaches its quarterly earnings, with investors divided over the outlook: will cloud demand hold steady, or will there be volatility as companies tighten budgets and weigh the expense of rolling out new AI technologies?
Tension surfaced in recent research notes. Mizuho cut its Microsoft price target to $620 from $640 but held onto an outperform-equivalent rating. The firm pointed to “generally good” public cloud demand and “very strong” AI adoption, yet flagged a softer-than-usual “budget flush”—the typical late-year spike in corporate spending. 1
Several firms trimmed their price targets but kept bullish views intact, based on a roundup of recent forecasts. Citigroup’s Tyler Radke dropped his target to $660 from $690, and TD Cowen’s Derrick Wood reduced his to $625 from $655. 2
At Davos this week, Microsoft CEO Satya Nadella cautioned that the AI sector risks losing “even the social permission” to consume scarce energy unless it produces clear benefits in health, education, and similar fields. He described “tokens” as the processing units driving AI systems—and, implicitly, their energy costs. 3
The conversation around AI monetisation is heating up. OpenAI, supported by Microsoft, has begun testing chatbot ads with a select group of advertisers, aiming for a rollout in early February, The Information reported. This move marks a step toward covering the steep expenses involved in developing and operating AI platforms. 4
Energy is turning into a major bottleneck. OpenAI unveiled a strategy this week aimed at controlling data-center power expenses, Reuters reported. The story also highlighted that Microsoft rolled out a similar community-driven effort last week, targeting electricity rates and water consumption at its U.S. data centers. 5
Microsoft slid roughly 14% from its 52-week peak. Trading volume hit around 26.6 million shares, surpassing the 65-day average of about 23.4 million.
Bulls face a familiar threat: Azure growth that falls short of expectations or hits capacity limits, even as AI-related spending keeps rising. This mix could squeeze margins despite seemingly strong demand.
Microsoft is set to unveil its fiscal second-quarter results after the market closes on Jan. 28, with the earnings call scheduled for 2:30 p.m. Pacific. Eyes will be on Azure’s growth figures, initial revenue from Copilot, and whether there’s any change in AI infrastructure spending momentum. 6
