"When one of Wall Street's most powerful banks calls a stock "the most under-owned megacap," it's worth paying attention. Morgan Stanley just made that call on Microsoft today, a company that has fallen into bear market territory after earnings that disappointed Wall Street, but showed significant strength across the company's business. Morgan Stanley's call comes at a time the stock is trading at its lowest multiple in years, but investors fear more downside ahead."
"The fundamentals support a contrarian view. Microsoft reported $81.27 billion in revenue for Q2 2026, with Microsoft Cloud revenue hitting $51.5 billion, up 26%. The Intelligent Cloud segment grew 29% year-over-year to $32.9 billion. CEO Satya Nadella stated: "We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises.""
"So now that we've covered the good news, why are shares continuing to sell off? Why Microsoft Has Struggled The disconnect between fundamentals and price action is jarring. Microsoft beat Q2 revenue estimates, delivering $81.27 billion against expectations of $80.4 billion. Adjusted earnings of $4.14 beat estimates of $3.92. The stock was trading at $543.47 when Fiscal Q1 earnings were filed, then fell to $482.52 by the Q2 filing January 28th, an 11% drop despite beating EPS estimates."
Morgan Stanley identifies Microsoft as the most under-owned megacap while shares have entered bear market territory amid investor concern. Microsoft reported $81.27 billion in Q2 2026 revenue, with Microsoft Cloud at $51.5 billion, up 26%, and Intelligent Cloud at $32.9 billion, up 29%. CEO Satya Nadella emphasized the early phases of AI diffusion and a growing AI business. Analyst consensus shows 57 buy/strong buy ratings, one hold, and a $596 price target implying about 50% upside. The stock has declined despite beating revenue and adjusted EPS estimates, trading at low valuation multiples and facing institutional underweighting.
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