Microsoft (MSFT) Stock: Air Force Awards $170M Cloud Contract As Stock Drops 20%

TLDR

• Microsoft secured a $170.44 million firm-fixed-price task order from the U.S. Air Force for its Cloud One Program through December 7, 2028.
• The contract is sole source, meaning it was awarded without competition, with work performed at Microsoft facilities across the continental United States.
• MSFT stock has dropped approximately 20% from its October 28 peak, losing over $700 billion in market capitalization.
• Multiple brokerages including Citigroup, Mizuho, and TD Cowen recently lowered their price targets for Microsoft stock.
• Microsoft’s Azure cloud business grew 40% in the September quarter, exceeding Wall Street expectations.

Microsoft received a $170.44 million contract from the U.S. Air Force on January 21, 2026. The Department of Defense awarded the firm-fixed-price task order for the Cloud One Program.

Microsoft Corporation, MSFT

The contract will provide Azure cloud service offerings to support the Air Force’s Cloud One Program and its customers. Work begins immediately with a completion date of December 7, 2028.

Microsoft will perform all work at its designated facilities across the contiguous United States. The Air Force Life Cycle Management Center issued the contract as a sole source acquisition, meaning no competitive bidding took place.

The initial obligation includes $1.94 million from fiscal year 2026 operations and maintenance funds. The full contract value totals $170.44 million over the nearly three-year period.

The Cloud One Program operates as an enterprise-level cloud computing platform for the Department of the Air Force. It provides communication and cloud capabilities supporting mission applications across the U.S. military.

Microsoft joins other major cloud providers serving the program. Amazon Web Services, Google Cloud, and Oracle also maintain vendor relationships with Cloud One.

Stock Performance Weighs on Investor Sentiment

MSFT stock has faced selling pressure in recent weeks despite the new government contract. Shares declined in six of the seven trading sessions leading up to the announcement.

The stock sits roughly 20% below its October 28 peak. Market capitalization dropped from over $4 trillion in October to $3.3 trillion by late January.

On January 21, shares fell 2.3% even as broader markets rebounded. The decline came on a day when President Donald Trump reversed plans for Greenland-linked tariffs on European countries.

Several Wall Street firms adjusted their outlook on Microsoft stock. Citigroup, Mizuho, and TD Cowen all reduced their price targets in recent days.

Analysts Maintain Buy Ratings Despite Cuts

Analyst consensus remains positive on Microsoft despite the recent price target reductions. According to Koyfin data, 56 of 58 analysts recommend “Buy” or higher ratings. The remaining two analysts recommend “Hold.”

The average price target stands at $622.20 per share. This implies approximately 40% upside from the stock’s last closing price.

Microsoft’s Azure cloud computing business posted 40% growth in the September quarter. The performance exceeded Wall Street expectations at the time.

The Department of Defense statement specified that fiscal year 2026 operations and maintenance funds totaling $1.94 million were obligated at the time of award. The Air Force Life Cycle Management Center serves as the contracting activity for this task order.

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