Microsoft shares tumble as AI spending worries and Xbox losses pressure stock

Microsoft’s stock fell roughly 20% in June 2026, marking its worst monthly performance since December 2000 and wiping out over $530 billion in market value. Analysts cite escalating AI‑related capital expenditures – $38 billion in the latest quarter and projected total spend of about $190 billion by 2026 – as a primary driver of the sell‑off. The heavy spending has squeezed free cash flow and raised doubts about short‑term profitability, prompting a downgrade of price targets by several banks.

Despite the share decline, the company posted solid earnings, with revenue up 18% year‑over‑year to $82.9 billion and an EPS of $4.27. AI‑related services, including Azure and the Copilot suite, continue to grow rapidly, contributing a $37 billion annual run‑rate and 123% year‑over‑year growth. New enterprise deals, such as a five‑year partnership with Haleon, have been announced, adding a modest bullish tint.

In addition, the Xbox gaming division is reported to have generated a $20 billion subsidy over five years while revenue fell by $0.5 billion, dragging the division’s margin to about 3% and triggering restructuring and potential studio closures. The combination of high AI capex and Xbox losses has intensified investor anxiety, leading to a broad sell‑off of major tech stocks and a sharp rotation out of AI chip makers back into AI software providers.