The Microsoft Stock Outlook Remains Upbeat Despite Layoffs

Microsoft (MSFT) recently disclosed that it is parting ways with up to 2.5% of its workforce. Sometimes companies conduct layoffs because their outlooks have deteriorated, but it's unlikely that Microsoft is cutting employees because it is struggling.

First of all, in the post-pandemic AI era, many Big Tech firms across the board have been laying off relatively small numbers of their workers here and there. Secondly, Microsoft's most recently reported quarterly financial results suggest that the firm is benefiting tremendously from the AI boom.

With the latter trend likely to continue for the foreseeable future and MSFT stock changing hands at a relatively low valuation, value investors looking for a Big Tech play should consider buying shares. Let's take a closer look.

Big Tech Has Been Laying Off Workers. Microsoft Is Joining the Crowd.

In the past year, Amazon (AMZN), Intel (INTC), Oracle (ORCL), Cisco Systems (CSCO), and Dell Technologies (DELL) have collectively spent billions on severance costs, according to a Business Insider report. That data, of course, indicates that these tech companies have each been laying off significant numbers of workers.

It appears that many of these companies are laying off many of the employees that they added during the pandemic, with AI now also performing meaningful amounts of work at these firms. So, Microsoft is not alone in its latest layoff decision, and likely just rebalancing its workforce.

Microsoft Continues to Benefit From the AI Boom

In a previous article about MSFT stock in March 2026, I noted that Microsoft is receiving a huge boost from the proliferation of artificial intelligence. I also theorized that changes the company had made to its AI assistant, Copilot, could meaningfully boost the adoption of the tool.

In Microsoft's fiscal third quarter reported on April 29, 2026, AI annual recurring revenue jumped 123% versus the same period a year earlier to more than $37 billion. Additionally, CEO Satya Nadella noted that the revenue generated by Copilot consumption fees almost doubled from the previous quarter. Nadella explained that the firm was seeing “customers increasingly extend Copilot with custom agents tailored to their workflows.” 

In Q3, overall revenue jumped 18% year-over-year (YOY) to $82.9 billion, while operating income surged 20% YOY to $38.4 billion. Given Microsoft's continued, strong momentum in the AI space, I expect its growth to either continue at similarly impressive levels or accelerate going forward.

The Bottom Line on MSFT Stock

Research firm Trefis is also bullish on Microsoft's position in AI. Citing its rapidly growing AI business and the company's decision to start charging customers based on usage, Trefis indicated that MSFT stock could jump to $550 per share within three years.

Shares of MSFT stock are changing hands at a forward price-to-earnings (P/E) ratio of 20.2 times. That's a very attractive valuation, given Microsoft's strong growth, tech dominance, and positive catalysts.