Microsoft just closed out its worst quarter on Wall Street since the 2008 financial crisis, as investors soured on the software giant’s prospects in artificial intelligence.

The company’s stock plunged 23% in the first quarter, a steeper drop than any of its tech peers or the Nasdaq, which fell 7% in the period. Microsoft bounced back a bit on Tuesday, alongside a broader market rally, with shares of the company gaining 3.3%, the biggest jump since July.

While Microsoft remains dominant in workplace productivity software and through its Windows operating system, the company is facing twin pressures to grow efficiently in AI while also building out its cloud AI infrastructure to support soaring demand.

Oil prices are surging because of the Iran war, potentially driving up costs for building and running data centers. And on the product side, Copilot, Microsoft’s AI assistant, has yet to show a lot of traction as users flock to competitive services from Google, OpenAI and Anthropic.

“Redmond is in a pickle,” wrote Ben Reitzes, an analyst at Melius Research, in a note on March 23, referring to Microsoft’s headquarters in Washington state. Reitzes, who has a hold rating on the stock, said the company has to use valuable capacity from its Azure cloud to fix Copilot, but has no choice “since Copilot is needed to maintain momentum in its most profitable and largest segment.”

Microsoft declined to comment.

Meanwhile, software stocks are getting pummeled as part of an AI-inspired “SaaSpocalypse” that has pushed names like Adobe, Atlassian and ServiceNow down more than 30% this year.

“Much of traditional SaaS is dying/in likely terminal decay,” Jason Lemkin, founder of SaaStr, wrote this week in a post on X, using the acronym for software as a service. In a blog post, he noted that earnings multiples for software trail the S&P 500.

Microsoft’s multiple hasn’t been this low since the fourth quarter of 2022, when OpenAI introduced ChatGPT, according to Capital IQ data.

Gil Luria, an analyst at DA Davidson, told CNBC that the sell-off isn’t justified, and he recommends buying shares. In the latest quarter, Microsoft reported revenue growth of almost 17%, accelerating from a year earlier.

“The dislocation in the fundamental performance of Microsoft and the stock performance of Microsoft, and the valuation of Microsoft, is the biggest it’s been in decades,” Luria said. He said he expects the company’s earnings growth to outpace the broader market this year.

“There is no stickier product in all of enterprise software than Microsoft Windows and Office,” he said.

Microsoft has been trying to build a larger revenue base from productivity software with the Microsoft 365 Copilot AI add-on, but so far, just 3% of commercial Office customers have licenses for it. Luria said he has access to 365 Copilot, but that he’s not a fan. More importantly, he said, Microsoft has pricing power with Office subscriptions. The company announced plans to raise prices in December.

With Copilot struggling to win over users, Microsoft said two weeks ago that Mustafa Suleyman, the former co-founder of AI lab DeepMind who had been running Copilot development for consumers, will focus on building AI models. Microsoft has tasked former Snap executive Jacob Andreou with leading the Copilot experience for consumers and commercial clients.

“Sure sounds like a demotion at best,” former Jane Street trader Agustin Lebron wrote on X. The change followed departures of prominent executives, including gaming chief Phil Spencer and Rajesh Jha, Microsoft’s highest-ranking productivity leader, who’s retiring.

Microsoft is still getting healthy growth out of Azure, which is second to Amazon Web Services in cloud infrastructure. Revenue in the division jumped 39% in the December quarter. Finance chief Amy Hood said in January that growth could have been in the 40s if the company had allocated all of its AI chips to Azure, rather than giving some to teams operating services such as Microsoft 365 Copilot.

Azure is benefiting from a massive backlog of business from OpenAI and Anthropic. Microsoft’s commercial remaining performance obligations at Azure more than doubled in the December quarter from a year earlier to $625 billion.

It’s a reminder that, among tech’s hyperscalers, Microsoft was viewed as an early mover in generative AI due to its 2019 investment in OpenAI and strategic partnership with the startup. But the companies no longer have an exclusive arrangement when it comes to cloud infrastructure and are now competing in a number of areas.

In February, OpenAI announced a service called Frontier that the company said “helps enterprises build, deploy, and manage AI agents that can do real work.”

Microsoft CEO Satya Nadella has been wearing a brave face, promoting the company’s AI enhancements on social media.

“It’s a lot of intense competition, but it’s not so zero-sum, as some people make it out to be,” he said in January.

Aaron Foresman, managing director of equity research at Crawford Investment Counsel, a Microsoft investor, said Nadella’s continuing presence is crucial for the company that he’s been leading since replacing Steve Ballmer in 2014.

“We’ve got a lot of trust and confidence in Satya,” Foresman said.

WATCH: Bank of America’s Tal Liani talks reinstating Microsoft as a ‘buy’

The White House hosted its “first humanoid robot guest” on Wednesday, with first lady Melania Trump appearing alongside a robot from robotics upstart Figure AI.

The robot, identified as Figure 3, accompanied the first lady during the second day of the Fostering the Future Together Global Coalition Summit, a gathering focused on technology and children’s education. 

The machine greeted attendees in multiple languages and described itself as “a humanoid built in the United States of America,” according to widely circulated footage from the event.

The display represented one of, if not the, highest-profile showcases of humanoid robotics in the U.S. to date and highlights how the tech is becoming a national priority amid global tech competition. Beijing has also promoted humanoid robots at highly publicized events this year.

The first lady used the robot to promote her push for artificial intelligence in children’s education, suggesting that the robots could one day act as interactive educators at home. However, Figure AI says its third-generation humanoids are also applicable for more general purposes, including commercial and household tasks. 

The White House spotlight is likely to boost the brand of Nvidia-backed Figure AI, a lesser-known robot company compared to larger humanoid players like Tesla‘s Optimus and Boston Dynamics, though some of its team comes from those competitors, as well as tech giants like Apple.

Figure AI was founded in 2022 by Brett Adcock, a tech entrepreneur and billionaire who previously co-founded the publicly traded drone company Archer Aviation and a digital hiring marketplace Vettery. 

Powering its robots is the firm’s in-house Helix AI system, a vision-language-action model that powers its robots and enables learning through observation and verbal commands.

Amid growing investor excitement for physical AI, the firm raised more than $1 billion in its Series C funding round in September led by Parkway Venture Capital with participation from other notable investors such as Nvidia, Intel Capital, Qualcomm Ventures and Salesforce. That gave it a post-money valuation of $39 billion. 

The fundraising is expected to be put towards the firm’s aim to deploy thousands of robots in homes and logistics over the coming years — a goal that has likely been made easier by a major endorsement from the White House. 

Figure AI has already begun work with its first commercial customer in BMW, deploying its robots for tasks like handling sheet metal parts in manufacturing facilities.

It’s possible that Melania’s endorsement of Figure AI’s robots as potential educators will trigger a reexamination of an ongoing lawsuit the company found itself in last year. 

In November, Figure AI was sued by its former head of product safety, who alleged he was fired after warning executives that the company’s robots were powerful enough to fracture a human skull.

Gruendel also alleged that one robot had carved a gash into a steel refrigerator door during a malfunction. Figure AI contends that Gruendel had been fired for poor performance, and described the allegations as “falsehoods.” Figure AI countersued in January, saying Gruendel failed in his role to help the company build a safe robot.

The lawsuit drew attention to broader questions about safety standards in humanoid robotics development and remains pending. 

Interestingly, the White House event on Wednesday wasn’t the first time that a company connected to Adcock received some major shine from the Trump administration. 

Shares of the drone company he co-founded, Archer Aviation, surged in June last year after U.S. President Donald Trump signed an Executive Order directing the establishment of a program to promote the safe integration of electric air taxis in U.S. cities.

Archer is participating in the initiative and is working on projects involving aircraft demonstrations. Following the June 2025 executive order, Archer raised $850 million in a registered direct stock offering. 

He remains a shareholder, according to investment research platform Business Quant, but he has no active executive, board, or advisory position at the company. 

Swedish legaltech Legora has raised $550 million at a $5.55 billion valuation in a Series D round, the company announced on Tuesday, as investors pile money into European AI startups.

The round was led by Accel, with participation from existing investors Benchmark, Bessemer Venture Partners, General Catalyst, ICONIQ, Redpoint Ventures and Y Combinator.

New investors including Alkeon Capital, Bain Capital, Firstmark Capital, Menlo Ventures, Salesforce Ventures, Sands Capital and Starwood Capital were also involved.

Legora’s Series D is its third raise in the past year.

The announcement comes on the back of a bumper start to the week for European AI companies.

U.K.-based AI infrastructure Nscale said on Monday that it had raised a $2 billion Series C and on Tuesday former Meta AI chief Yann LeCun’s new AI startup Advanced Machine Intelligence Labs announced it had picked up over $1 billion. U.K. autonomous driving startup Wayve hit an $8.6 billion valuation in February after raising a $1.2 billion Series D.

Record funds were ploughed into European AI startups in 2025, with $21.7 billion invested, according to dealcounting platform Dealroom. Just over two months into 2026, AI startups in the region have raised more than $9 billion.

“Over the past year, the pace of adoption in the U.S. has exceeded our expectations, as leading firms and in-house teams move decisively from experimentation to embedding AI across their organisations,” Max Junestrand, CEO and cofounder of Legora, said in a statement.

“This funding enables us to accelerate our U.S. growth – investing in talent and infrastructure, strengthening our presence in key markets, and ensuring we can support customers on the ground as they integrate AI into their core workflows.”

Legora is expanding its footprint in the U.S. with new offices in Houston and Chicago, alongside its existing presence in New York and Denver. The company expects to open additional local hubs and grow to more than 300 employees across its U.S. offices by the end of 2026, it said.

Salesforce shares tumbled 5% in extended trading on Wednesday after the customer service software maker reported healthy results, although its fiscal 2027 revenue view trailed Wall Street projections.

Here’s how the company did in comparison with LSEG consensus:

• Earnings per share: $3.81 adjusted vs. $3.04 expected
• Revenue: $11.20 billion vs. $11.18 billion expected

Salesforce’s revenue grew 12% year over year in its fiscal fourth quarter, which ended on Jan. 31, according to a statement. It’s the company’s fastest growth rate in two years.

The company has allocated $50 billion for new share buybacks, “because these are some low prices,” CEO Marc Benioff said on a conference call with analysts. As of Wednesday’s close, Salesforce shares had fallen about 28% so far in 2026, while the S&P 500 index had gained 1%.

Net income of $1.94 billion, or $2.07 per share, increased from $1.71 billion, or $1.75 per share. Adjusted earnings per share excludes stock-based compensation expense, amortization of purchased intangible assets and restructuring costs.

Current remaining performance obligation, a sum of contracted but unrecognized revenue and unbilled amounts that will be recognized as revenue over the next year, came in at $35.1 billion. The figure was higher than StreetAccount’s $34.53 billion consensus.

Guidance for the fiscal first quarter included $3.11 to $3.13 in adjusted earnings per share on $11.03 billion to $11.08 billion in revenue. Analysts surveyed by LSEG were looking for $3.00 per share and $10.99 billion in revenue.

For the 2027 fiscal year, Salesforce called for $13.11 to $13.19 in adjusted earnings per share on $45.8 billion to $46.2 billion in revenue, which implies 10% to 11% growth. The LSEG consensus had $13.12 per share on $46.06 billion in revenue.

In recent weeks, investors have become increasingly worried that generative artificial intelligence models might dampen major software companies’ growth opportunities.

On Monday, IBM stock dropped 13% in its worst daily performance since 2000 after Anthropic published a blog post saying its Claude Code AI tool for developers can assist with modernizing code written in the Cobol programming language.

During the quarter, Salesforce released an AI-enabled Slackbot assistant in its Slack team communication app for paying clients. The company also completed its $8 billion Informatica acquisition and announced plans to buy marketing company Qualified. Informatica, a data management software company, contributed $399 million in revenue during the quarter.

The company now sees $63 billion in fiscal 2030 revenue, up from a target of over $60 billion it presented in October. Analysts polled by LSEG had been looking for $59.07 billion. The new number includes a contribution from Informatica.

Five customers of ServiceNow moved to Salesforce’s competing product for information technology service management during the quarter, Benioff said on the TBPN podcast on Wednesday.

Salesforce has been working to expand adoption of its Agentforce AI technology for automating customer service and other corporate functions.

The company said annualized Agentforce revenue exceeded $800 million in the quarter.

Morgan Stanley analysts, with the equivalent of a buy rating on Salesforce stock, said in a Monday note to clients that conversations with partners “continue to indicate we are in the early innings.”

Meanwhile, Salesforce is seeing a benefit from its stake in Anthropic, generating an $811 million gain on strategic investments in the quarter. That’s up from $96 million in the year-ago quarter.

“I think we just put another $100 million into the new round,” Benioff said. We’re [at] about $330 million into Anthropic invested. It’s almost about 1% of Anthropic. And believe me, I wish we had invested a lot more.”

Benioff said the company isn’t doing all that it can with debt.

“We’re just very under-leveraged on our balance sheet,” he said.

WATCH: Investors are paying less and less for software earnings these days, says Jim Cramer

Software stocks made a comeback on Tuesday after Anthropic hosted its enterprise agents event, where it revealed new partnerships, quelling some investor fears that the sector could be displaced by artificial intelligence.

The AI startup launched new updates to Claude Cowork that allow companies to integrate the productivity tool into a host of enterprise apps, such as Salesforce-owned Slack, Intuit, Docusign, LegalZoom, FactSet and Google‘s Gmail.

Organizations can also deploy customizable plugins across sectors like financial analysis, engineering and human resources, Anthropic said.

Salesforce shares jumped 4% following the Anthropic announcement while Docusign and LegalZoom each gained more than 2%. Thomson Reuters‘ stock surged more than 11% and FactSet shares rose nearly 6%.

Analysts at Wedbush Securities said in a Tuesday research note that Anthropic’s event showed the competition risk to software from AI is “overblown.”

They argued that models aren’t capable of replacing entire workflows that remain “deeply embedded” in software infrastructure.

“The reality is that these new AI tools will not rip and replace existing software ecosystems and data environments with these AI tools only as useful as the data it can reach,” the analysts wrote.

Anthropic’s recent product rollouts have sent software and cybersecurity stocks tumbling in recent weeks as investors digested the looming threat of AI tools to those business models.

CrowdStrike closed largely flat Tuesday, but many of those stocks climbed higher. Okta and Cloudflare rose about 2%. Zscaler and Tenable each gained about 4% and SentinelOne climbed 3%.

IBM shares sold off heavily on Monday after Anthropic touted a tool that could automate aspects of a programming language run on IBM’s computers. IBM’s stock rebounded Tuesday, climbing more than 2%.

— CNBC’s Ashley Capoot and Kate Rooney contributed reporting to this story.

AI robots will exceed the working population within a few decades as more firms adopt AI agents and continue to squeeze costs, a former Citi executive warned on Monday.

Rob Garlick, Citi Global Insights’ former head of innovation, technology, and future of work, told CNBC’s “Squawk Box Europe” that as leaders continue to prioritize profitability, their human workers will be left in the dust.

“We have a leadership system in the economic terms and business terms that celebrates profitability,” Garlick said in a conversation with CNBC’s Steve Sedgwick and Ben Boulos.

“When you marry profitability up with the technology progress, we have the biggest trade in history coming, which is basically that artificial intelligence will be able to do more and more, better and better, cheaper and cheaper, and that will be able to substitute for people.”

Garlick, who recently authored “AI – Anarchy or Abundance? Why the Future of Work Needs Pro-Human Leaders,” explained that his previous research at Citi showed that the number of AI robots is going to skyrocket as a result of these business decisions.

“We’re going to go over the next couple of decades to more moving robots than the working population, and then you add on agents, little agents, and it is going to explode,” he added.

AI robots ranging from humanoids to domestic cleaning robots and autonomous vehicles are forecasted to increase to 1.3 billion by 2035, according to a 2024 Citi report led by Garlick. The number of AI robots would quickly increase to over 4 billion by 2050, per the insights.

The Citi report even measured how long it would take for a robot to pay for itself through the money saved by replacing a human worker, for example, a $15,000 robot would break even in 3.8 weeks for a $41 an hour human job, or 21.6 weeks for a $7.25 human job. Meanwhile, a robot that costs $35,000 would have a payback time of 8.9 weeks for a $41 an hour human job.

“You can already buy a humanoid today, which gives you a payback period versus human workers of less than 10 weeks,” Garlick told CNBC, citing a figure from his book. “Humans can’t compete on this basis.”

Microsoft’s Work Trend Index report showed that 80% of leaders expect AI agents to be largely integrated into their AI strategy within the next 12 to 18 months. AI agents are a type of software program that can make decisions and complete tasks without much human direction.

Meanwhile, McKinsey & Company’s global managing partner, Bob Sternfels, noted that the company currently employs 20,000 agents alongside 40,000 humans, in an interview with Harvard Business Review. A year prior, the company only had 3,000 agents, and Sternfels predicts that in 18 months from now, there will be an equal number of employees and agents.

Tesla CEO Elon Musk also shared similar views at the World Economic Forum’s flagship conference in Davos last month, saying that AI will likely surpass human intelligence by the end of this year.

“My prediction is, in the benign scenario of the future, that we will actually make so many robots in AI that they will actually saturate all human… there will be such an abundance of goods and services because my prediction is that there’ll be more robots than people,” Musk said.

Fears around AI replacing workers have mounted in the past year as major firms, including Amazon, Salesforce, Accenture, Heineken, and Lufthansa, have cited the technology as part of the reason for eliminating thousands of roles.

Kristalina Georgieva, managing director at the International Monetary Fund, told CNBC in January that AI is “hitting the labor market like a tsunami” and warned that “most countries and most businesses are not prepared for it.”

In the U.S., AI played a role in almost 55,000 layoffs in the U.S. in 2025, according to December data from consulting firm Challenger, Gray & Christmas.

However, some leaders are striking a more positive tone. Nvidia’s CEO Jensen Huang predicts that the “AI boom” will create six-figure salaries for the workers building AI and chip factories. Huang said the technology will boost skilled trade work, such as for plumbers, electricians, construction, and steel workers.

Software stocks have been hammered in recent weeks as investors worry about threats from artificial intelligence. In the startup world, Canva has been among the highest fliers due to its popularity with designers, but that market is showing vulnerability, with larger rival Adobe down 30% so far this year.

As Canva reckons with dramatic changes in the market, the design software vendor is getting acquisitive. The company said Monday that it’s purchased two startups — Cavalry and MangoAI — that stand to help it challenge Adobe.

Cavalry, a four-person startup, sells subscriptions to software for creating two-dimensional animations. MangoAI is a stealth-mode company, whose technology can be used for creating short videos for advertising. Terms of the deals weren’t disclosed.

Cameron Adams, Canva’s co-founder and product chief, told CNBC that customers have been asking what the company can offer in motion graphics. Cavalry, which Canva has used for its own projects, has gained attention among designers on social media as an alternative to Adobe’s After Effects for some work.

Canva will continue to operate Cavalry for people to use and buy independently, while also incorporating the animation technology into the core Canva product and the Affinity application for professional designers. Canva bought Affinity in 2024 and made it free in October.

Amazon, ByteDance, Google, and OpenAI all have employees that are paying customers, according to Cavalry’s website.

Canva plans to incorporate MangoAI into the Canva Grow advertisement generator, which is available through its business tier at $250 per person per year. The MangoAI technology is able to track video performance and make recommendations.

“There’s a whole bunch that goes into creating the right video,” Adams said. That includes “being able to cut stuff down, being able to repurpose content from other campaigns and put it together, being able to take a great call to action that happens at the end of one video and then append it to the hook that happens in another video,” he said.

“Analyzing all of that across your campaigns is the full vision of Canva Grow, and Mango will help enable that,” Adams added.

Canva said it ended 2025 with over $4 billion in annualized revenue, up 36% from a year prior. Adobe reported $6.2 billion in revenue for the November quarter, up 10%. Adobe’s market capitalization stood at $101 billion on Monday, while Canva said in August that it had been valued at $42 billion in a secondary share sale, before the recent plunge in software stocks.

Adams said Canva has seen instances of people directing generative AI models to create content such as slide presentations and social media posts. But AI can’t do everything, he said.

“AI is great at getting you to 80%,” Adams said. “That last 20% where you’re confident that you can push this piece of content out and truly represent your brand and speak to your audience and achieve the goals that you want to achieve is vital to have, and that last 20% is really tricky to do.”

Canva, which now has over 5,000 employees, is not currently raising a new funding round, Adams said.

“Our revenue growth has not stopped, our user growth has not stopped, and the quality of our product is getting better and better with the inclusion of AI,” he said.

WATCH: Investors are paying less and less for software earnings these days, says Jim Cramer