Microsoft (MSFT) shares fell 3.5% on June 25, with a month-to-date decline of 21.6%. Microsoft is the worst-performing stock among the "Magnificent Seven" tech giants in June. Baptista Research analyst Ishan Majumdar noted that Microsoft's FY2026 capital expenditure expectations have approached $190 billion, up over 60% year-over-year.
Microsoft's 21.6% June Decline Marks Worst Performance Since 2000
According to Dow Jones Market Data, Microsoft's 21.6% month-to-date decline in June is its worst June performance since 2000. On Thursday, MSFT ranked 485th among the 503 components of the S&P 500, closing down 3.5%.
The Roundhill Magnificent Seven ETF, which tracks the seven mega-cap tech stocks, entered correction territory on Tuesday, defined as a decline of at least 10% from a recent peak. Alphabet, Amazon, Meta, and Microsoft are expected to collectively invest $700 billion in AI-related business this year.
Baptista Research: Microsoft's FY2026 CapEx Expectations Near $190 Billion
Ishan Majumdar of Baptista Research told MarketWatch that Microsoft's FY2026 capital expenditure expectations are approaching $190 billion, up over 60% year-over-year, while free cash flow is expected to decline by approximately 10% over the same period. The market is reassessing Microsoft's positioning, shifting from a "free cash flow growth company" to an "infrastructure-intensive company."
Majumdar noted that investors who held Microsoft as a free cash flow investment "are now being asked to pay for a capital-intensive cycle they did not anticipate." Benchmark analyst Yi Fu Lee told MarketWatch that Microsoft's stock pressure is linked to overall market weakness, as investors are currently digesting the scale and timing of returns from massive AI investments.
Benchmark Analyst: Microsoft Still Has Positive FCF, Forward P/E Only ~22x
Yi Fu Lee said that Microsoft still "has stable positive free cash flow," and the company's strategy focuses on long-term growth. He believes Microsoft remains one of the "highest-quality routes" to invest in AI, and the current weakness is a buying opportunity for investors.
Majumdar added that "fundamentals remain intact," noting that Microsoft's current forward price-to-earnings ratio is around 22x, below the industry median of 32x. He stated: "The current sell-off is more of a repricing of the future earnings path rather than a rejection of the company itself."
Frequently Asked Questions
What is the root cause of Microsoft's ongoing stock decline in June?
According to two analysts, the main reason is that investors are digesting the scale and timing of returns from massive AI capital expenditures. Baptista Research pointed out that Microsoft's FY2026 capital expenditure expectations have reached nearly $190 billion (up over 60% year-over-year), with free cash flow expected to decline by approximately 10% over the same period, leading the market to reassess its valuation logic.
How does Microsoft's valuation compare to the industry?
Baptista Research's Majumdar noted that Microsoft's current forward price-to-earnings ratio is around 22x, below the industry median of 32x. He stated that this valuation gap "cannot be ignored" and believes the current sell-off is a repricing of the future earnings path, not a rejection of the company's fundamentals.
How did the "Magnificent Seven" tech stocks perform overall in June?
According to Dow Jones Market Data, all of the Magnificent Seven tech stocks were down in June, with Microsoft's 21.6% decline being the largest among them. The Roundhill Magnificent Seven ETF, which tracks these stocks, entered correction territory on Tuesday (declining more than 10% from a recent peak).
