Microsoft’s stock fell $48.13 a share on January 29, 2026, from $481.63 to $433.50, a drop of 10%. A securities fraud class action now blames that fall on what Microsoft told investors about its Copilot AI chatbot.
The law firm Bleichmar Fonti & Auld, known as BFA Law, announced the suit on Aug. 3, 2026. It names Microsoft Corporation (NASDAQ:MSFT) and certain senior executives. The case is pending in the U.S. District Court for the Western District of Washington under the caption City of St. Clair Shores Police and Fire Retirement System, et al., No. 26-cv-02071. It asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 for investors in Microsoft common stock.
Investors had until August 11, 2026 to ask the court to be named lead plaintiff.
What the complaint alleges
According to the complaint, Microsoft repeatedly promoted Copilot’s best-in-class capabilities during the relevant period, and those claims supposedly drove wide and growing use. That apparent success let the company report surging revenue from Azure, its cloud platform and main growth driver in recent years, which has benefited from Microsoft’s multi-billion-dollar AI investment.
The suit says the reality was different. Copilot, it alleges, had severe functionality problems that cut user adoption and put Azure revenue at risk.
The alleged reckoning came on January 28, 2026. Microsoft reported disappointing results for the second quarter of its fiscal 2026 and said Azure growth had slowed suddenly. The complaint says it also disclosed for the first time that Microsoft 365 Copilot had only 15 million premium customers, materially below analyst estimates. The stock fell the next day.
On February 3, The Wall Street Journal ran an article headlined “Microsoft’s Pivotal AI Product Is Running Into Big Problems.” It reported that Copilot had lost market share and that “confusing brand positioning and interoperability problems have frustrated users.”
These are allegations in a complaint, not findings by a court. The notice carried no response from Microsoft. BFA says it represents plaintiffs on a contingency basis, so shareholders pay no court costs or litigation expenses, and that it will seek court approval for any fees.
