Microsoft stock falls 30% despite AI and cloud growth as company cuts costs with own models

Microsoft reported Q3 FY2026 revenue of $82.9 billion, up 18%, driven by a 40% jump in Azure and AI revenues surpassing $37 billion, a 123% increase. The order backlog rose to $627 billion, giving strong visibility. Despite these figures, the Microsoft share price has slid about 30% from its October 2025 high and is down roughly 16% year‑to‑date, trading near €337 in Frankfurt.

Analysts attribute the decline to the company’s massive AI spending plan—around $190 billion for the current year—which pressures margins and free cash flow. To offset this, Microsoft announced a €500 million annual cost‑saving program by shifting thousands of weekly AI queries in Excel and Outlook to its own MAI model, reducing reliance on external providers such as OpenAI. HSBC lowered its price target marginally to $567 but kept a buy rating.

The strategy aims to use the internally developed MAI‑Thinking‑1 model for routine spreadsheet tasks while retaining OpenAI’s GPT‑5.6 for more complex work, targeting a 40% reduction in inference costs. The move reflects a broader industry trend toward specialized large‑tabular models for spreadsheet automation.