Melius analyst: Microsoft’s Copilot reorganization is a ‘red flag’

Melius analyst: Microsoft’s Copilot reorganization is a ‘red flag’

By Jeremy Phillips
Publication Date: 2026-03-23 22:56:00

  • Microsoft (MSFT) reported only 15 million Copilot seats sold out of 450 million total users (3.3% penetration) despite billions spent on development and marketing, prompting an executive reorganization that moved Copilot’s leader to focus on building proprietary AI models, signaling internal dissatisfaction with the product’s market fit.

  • Microsoft’s expected increased spending on proprietary model development will compound already-strained free cash flow as capital expenditures have doubled to $29.88B year-over-year and depreciation pressures mount.

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Microsoft (NASDAQ:MSFT) is down more than 20% year-to-date, making it the worst-performing stock in the Mag-7 by a wide margin. And according to Ben Wright of Melius Research, who…