It’s time to move to the sidelines on Microsoft , according to KeyBanc. Analyst Jackson Ader downgraded the “Magnificent Seven” titan to sector weight from overweight and removed his price target for the stock. “It’s been a frustrating time for Microsoft’s stock over the last year or so, and we are taking whatever razor-thin outperformance shares have eked out YTD and moving on,” Ader wrote. “To be clear, this isn’t about calling a quarter or anything like that. We’re not tactically downgrading ahead of the print in a couple weeks due to any single response in our survey of checks; this is more about seeing the data building and validating some worries we’ve had for a while.” MSFT YTD mountain MSFT YTD chart Ader pointed to flattening in long-term cloud demand as a driver for the downgrade. The analyst also noted a deteriorating macroeconomic backdrop and lower overall IT budget growth this year. He also shed doubt on Microsoft’s spending into its artificial intelligence verticals, such as its Copilot program. “Capex spend is being called into serious question, and Copliot revenue and demand have not lived up to our expectations. What was a win-win just over 12 months ago has flipped into a risk-risk. Microsoft has very few options that have positive outcomes here, in our view,” he said. “We think convincing the investor community that it has spent the absolute right amount of money on data centers while still keeping the AI revolution dream alive is going to be a tough needle to thread.” Investors will get more clarity around Microsoft on April 30, when the tech giant is slated to report fiscal third-quarter earnings. Despite the downgrade, most analysts covering the stock remain bullish on it. LSEG data shows that 54 of 60 analysts who cover Microsoft rate it as a buy or strong buy. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
