Microsoft (MSFT) stock has dropped 17% this year to around $400 from a peak of $555 last year. The company’s recent earnings report disappointed markets, leading to a nearly 10% drop in stock price, erasing over $350 billion in market cap in one day. Analysts have lowered target prices, but the mean target price remains above $600.

In the December quarter, Microsoft beat on both top and bottom lines, but concerns linger over its AI spending spree and slowing cloud growth. The company’s capex was $37.5 billion, raising questions about monetization of investments. Cloud revenues rose 26% to $51.5 billion, with Azure reporting a 39% growth. Markets worry about RPO concentration and OpenAI’s ability to meet commitments.

Microsoft’s valuations have fallen, with the stock trading at a forward price-to-sales multiple of 8.78x, the lowest since mid-2023. The forward price-to-earnings (P/E) multiple is around 26x. Recent price action has been tied to developments related to OpenAI, as Microsoft owns over a quarter of the stake.

Despite challenges, MSFT stock is seen as attractive in the current market environment. The company’s Windows and Office business benefit from increasing PC sales, while LinkedIn and Azure continue to grow. An eventual listing of OpenAI could help Microsoft monetize its stake. Given valuations and growth outlook, MSFT stock could rise above $600 in the next two years.

Read more at Yahoo Finance: Could Microsoft Stock Hit $600 in 2026 Despite OpenAI Woes?