Microsoft (MSFT) Stock: Secures $750M Perplexity Cloud Deal as Shares Drop 10%

TLDR

• Microsoft secured a $750 million three-year cloud deal with AI startup Perplexity through its Azure Foundry service.
• The agreement provides Perplexity access to AI models from OpenAI, Anthropic, and xAI on Azure’s platform.
• Microsoft stock plunged 9.99% on January 29 after reporting disappointing Azure growth and margin guidance.
• Analysts maintain a Strong Buy rating on Microsoft with an average price target of $603.95, implying 39.3% upside.
• The deal strengthens Azure’s position in the AI infrastructure race against Amazon Web Services.

Microsoft landed a $750 million cloud agreement with Perplexity AI. The three-year deal brings the AI search startup onto Azure infrastructure through Microsoft’s Foundry service.

Perplexity gains access to frontier AI models from OpenAI, Anthropic, and xAI. The Foundry platform hosts multiple leading AI models in one location.

Microsoft has positioned Foundry as the top platform for AI deployment. The service attracts startups through partnerships with major AI vendors.

Microsoft Corporation, MSFT

The Perplexity agreement strengthens Microsoft’s foothold in AI infrastructure. Azure competes directly with Amazon Web Services for lucrative AI workloads.

Stock Drops on Azure Concerns

Microsoft stock fell 9.99% on January 29 after quarterly results disappointed investors. The company reported slower Azure cloud growth in Q2 FY26.

Management provided weaker margin guidance than expected. Wall Street analysts responded by cutting price targets on the stock.

Analysts blamed tepid Azure performance for the downward revisions. Despite the selloff, Microsoft maintains strong support from Wall Street.

The stock carries a Strong Buy consensus rating with 33 Buy ratings and one Hold. The average Microsoft price target stands at $603.95.

This target implies 39.3% upside potential from current levels. Over the past year, Microsoft stock has gained 4.5%.

Battle for AI Customers

The deal highlights intense competition among cloud providers for AI business. Microsoft, Amazon, and Google are fighting to host next-generation AI applications.

Perplexity reached a $20 billion valuation as of September 2025. The startup competes with Google and OpenAI in disrupting traditional search.

However, the Microsoft partnership provides crucial redundancy. Diversifying cloud vendors helps Perplexity scale while reducing dependency on one provider.

Relations between Perplexity and Amazon have deteriorated recently. Amazon sued Perplexity in November over its “Comet” shopping agent.

Amazon claims the tool violates marketplace terms of service. The lawsuit creates an opportunity for Microsoft to capture additional Perplexity business.

Azure Foundry Strategy

Microsoft’s Foundry service will serve as a secondary engine for Perplexity operations. The platform eliminates the need for startups to build everything in-house.

Perplexity has raised less capital than rivals OpenAI and Anthropic. Both competitors secured massive infrastructure deals with cloud providers.

The $750 million commitment ranks among the largest cloud deals for AI startups in 2026. It demonstrates Microsoft’s willingness to invest heavily in securing AI customers.

The three-year agreement locks Perplexity into Azure infrastructure through 2029. Microsoft continues promoting Azure as essential infrastructure for AI development.

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