Tariffs are tanking tech stocks, so why is Microsoft escaping the worst of the bloodbath?
As
Microsoft
celebrates its 50th anniversary
Friday with a Seattle event spotlighting its latest AI developments, investors are likely breathing a sigh of relief: the company’s stock has weathered the
tariff tidal wave
far better than its peers. Among the so-called Magnificent 7 cohort of tech companies, Microsoft shares have experienced the smallest decline since Trump’s global tariff announcement Thursday, with some analysts pointing to its cloud computing offerings, and its broad base of enterprise customers, as being more protected from the worst impacts of the tariffs.
Microsoft’s stock price is down roughly 5.8% from its closing price on Wednesday, the evening of the tariff announcement. By contrast,
Meta
,
Apple
,
Amazon
,
Nvidia
, and
Tesla
have all suffered double-digit percentage declines, plunging between 10% and 16% and erasing tens of billions of dollars in market value. Only Google-parent company Alphabet has fared almost as well as Microsoft among the Mag 7, with shares selling off 7% over the past two days.
Analysts told
Fortune
that Microsoft has an edge because it doesn’t deal much in physical or consumer products—so it has less direct exposure to tariffs. What’s more,
Microsoft’s focus on enterprise customers
means that a big portion of its revenue streams are tied to long-term contracts, giving Microsoft extra stability. In Microsoft’s fiscal year 2024, its cloud segment, which includes Azure, was the company’s largest revenue contributor, generating about 43% of the company’s total revenue.
The companies that have low exposure to tariffs and higher enterprise revenue mix will likely be “safe havens,” Daniel Newman, CEO of analyst firm The Futurum Group, told
Fortune
. “Microsoft is among the best.”
Rishi Jaluria, managing director, software equity research at RBC Capital Markets, pointed out that Microsoft is not immune to tariffs, but it should be generally well-positioned. “The largest piece of their business is enterprise software, where they’re selling cloud applications and infrastructure to corporate customers,” he said. “Even if there were reciprocal tariffs, I don’t know how you would tariff proper software services.”
Apple, on the other hand, would be heavily impacted by the tariffs if, say, iPhones become very expensive and the U.S. economy slips into a recession, said Patrick Moorhead, founder and chief analyst at Moor Insights and Strategy. Meanwhile, he said, “Amazon buys most of its products from China. Big tariff risk.”
Microsoft, whose main hardware products are the
xBox gaming console
and various laptop models, sells “so few products that it isn’t spelled out in detail on their income statement,” he added.
The company does invest, of course, in physical infrastructure like massive data centers to serve its Azure cloud, and Microsoft recently made headlines for
pulling back
on dozens of those investments around the world. But semiconductors, along with pharmaceuticals, lumber, bullion, and certain minerals, are currently excluded from the 32% reciprocal tariffs announced by President Trump.
Reduced corporate spending by Microsoft’s customers could become a challenge, analysts agreed. But while it’s difficult to say what will happen over the coming weeks and months, even if there are more reciprocal tariffs that trigger a recession, Microsoft should still be more protected than consumer-focused companies, Jaluria said. Many of the services Microsoft sells to enteprise customers are important for running their businesses, and not easily cut.
In addition, Futurum Group’s Newman argued that AI is deflationary—meaning it can reduce costs by automating tasks—which is something
Microsoft is deeply invested in
through its Copilot software and Azure AI services.
“I expect companies to continue to invest in AI for agents and other tools that will enable them to lower operating expenses and reduce or manage headcount,” Newman said.
Update:
This story has been updated since it published to reflect Friday’s closing prices.
