Why is Microsoft stock gaining 4% today?

Microsoft MSFT shares rose 4% on Wednesday after consumer health company Haleon announced a new five-year agreement to expand its use of Microsoft's artificial intelligence, cloud, and data technologies across its global operations.

The partnership strengthens Microsoft's position in enterprise AI adoption while the company also faces reports that it is preparing another round of job cuts as it continues to invest heavily in artificial intelligence infrastructure.

Microsoft currently trades at a forward 12-month price-to-earnings ratio of 21.52 times.

Haleon expands Microsoft's AI footprint

Under the five-year agreement, Haleon will expand its use of Microsoft 365 Copilot, Azure cloud services, and Microsoft's AI systems throughout its business.

The consumer healthcare company said the technology will help automate routine tasks, improve collaboration, strengthen security, and enhance identity protection across its AI systems.

The companies also plan to jointly develop AI tools for consumer research, product development, supply chain management, and broader business operations.

Haleon said these capabilities are intended to help employees make faster decisions and accelerate the delivery of products to consumers.

The agreement builds on Haleon's existing relationship with Microsoft and supports the company's goal of reaching one billion more consumers by 2030.

For Microsoft, the deal represents another large enterprise customer adopting its AI platform, further expanding the commercial deployment of its artificial intelligence offerings.

Microsoft balances AI investment with cost reductions

The AI expansion comes as Microsoft is reportedly preparing to reduce its workforce.

According to a Business Insider report, the company could announce thousands of job cuts as early as next week.

The layoffs are expected to affect fewer than 2.5% of Microsoft's approximately 228,000 full-time employees.

The reported reductions would be smaller than the company's previous round of layoffs, when Microsoft eliminated roughly 4% of its workforce.

While job reductions within the Xbox division had been widely anticipated following ongoing pressure on the gaming business, the report said sales and consulting roles could also be affected.

Microsoft has not officially confirmed the reported layoffs.

The timing coincides with the end of Microsoft's fiscal year on June 30, a period when the company has historically reviewed budgets, staffing levels, and strategic priorities.

The reported workforce reductions also reflect a broader trend across the technology industry, where companies continue to trim headcount while increasing investment in AI infrastructure.

Valuation and analyst outlook remain favorable

Despite falling 23% during the first half of 2026, Microsoft is increasingly being viewed as a value stock because of its earnings profile and expected revenue growth.

According to MarketWatch contributor Mark Hulbert, historical data dating back to 1947 shows that value stocks have generally outperformed growth stocks during periods of rising inflation, similar to the current economic environment.

Microsoft is expected to grow revenue at more than twice the pace of the S&P 500 through 2028, according to a MarketWatch report.

Wall Street analysts also remain broadly optimistic on the company's outlook.

According to TipRanks, 35 of 36 analysts covering Microsoft rate the stock a Buy, while one recommends Hold. None have a Sell rating.

The average 12-month price target stands at $562.10, implying about 38% upside from current levels, reflecting continued confidence in Microsoft's long-term AI strategy and enterprise software business.