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Microsoft’s Copilot Problem Isn’t What You Think
By Chris Markoch. Publication Date: 4/12/2026.
Key Points
- Microsoft’s Copilot adoption is meaningful but still small relative to its overall business.
- Investor expectations for AI monetization may be outpacing reality.
- The stock’s pullback has created a valuation closer to the broader market.
- Special Report: Elon Musk already made me a “wealthy man”
Microsoft Corp. (NASDAQ: MSFT) continues to trade near its 52-week low and is one of the worst-performing Magnificent Seven stocks (less magnificent in 2026). One reason for the sour sentiment toward Microsoft is Copilot, the company’s artificial intelligence (AI) tool that integrates with its Microsoft 365 software and productivity suite.
In Microsoft’s Q2 2026 fiscal year earnings report, it cited 15 million paid Microsoft 365 Copilot seats. That’s the first time the company disclosed a paid-seat number for Copilot, and it left analysts and investors wanting more.
At $30 per user per month, 15 million seats are meaningful. But it’s small compared with the revenue Microsoft generates from products like Azure and its massive installed user base.
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See the small-cap stock powering the SpaceX buildout todayWhere the debate around Copilot goes off course is treating it like the entire company. It’s like a food critic going into a pizza parlor and critiquing the hamburger. Copilot is often portrayed as the primary revenue driver when a more accurate description is a premium, value-added feature layered on top of an already dominant platform.
Expectations Versus Adoption
The issue with Copilot comes down to framing. Investors have treated Copilot adoption as if it were a referendum on Microsoft’s entire AI future. That’s a much bigger leap than the business has justified so far.
Microsoft is still Microsoft: a platform company with a deep enterprise moat, massive recurring revenue, and an enviable distribution advantage. Copilot may ultimately become an important monetization layer, but it does not need to be the dominant revenue driver for the investment case to remain intact.
That is why the debate can feel disconnected from the actual business. Investors are looking for Copilot to deliver a fast, visible payoff, but Microsoft’s model usually plays out on a slower timetable.
Microsoft has built its position by turning distribution into durability, and Copilot fits that pattern. It’s being embedded into products customers already use, so the upside may show up in retention, pricing power, and broader usage across Microsoft’s ecosystem rather than in a dramatic standalone revenue figure.
That matters because AI doesn't have to produce an instant revenue spike to be valuable. In Microsoft’s case, the more important question is whether Copilot makes Microsoft 365 stickier, deepens enterprise relationships, and strengthens the case for larger cloud commitments.
Those effects may be incremental initially, but they can compound over time. The market often wants a clean narrative and a single headline number. Microsoft is offering something more subtle: a feature that can improve the economics of an already elite business.
Is Copilot Worth a 36% Drop in Market Cap?
Since the sell-off in MSFT started in October 2025, the company’s market cap has fallen by roughly 36%. Not all of that decline is due to Copilot. There’s also concern about the level of capital expenditures (CapEx) required to build out data center capacity.
For that matter, there are questions about the timing and scale of those data center needs. More importantly, investors want to know when they will start seeing a return on those billions of dollars in the company’s financials.
After Microsoft reiterated its CapEx plans in the earnings report, Copilot became the story many investors focused on—perhaps to their own detriment.
Microsoft may not need Copilot to become a blockbuster for the stock to work, but some investors keep holding it to that standard. The company remains a fundamentally strong platform business—Copilot is an important piece, but not the whole story.
MSFT Stock Offers Real Value
In early April, MSFT was trading for around 28x forward earnings. That’s roughly in line with the average price-to-earnings ratio for the S&P 500 and well below the premium typically afforded to technology stocks.
That’s where investors should look at what analysts really expect for MSFT—and the consensus is fairly bullish. The consensus price target of $588.97 is nearly 60% above the stock’s price at the time of writing. A few low targets weigh on the average, but 40 of 45 analysts rate MSFT a Buy.
What may be missing is the volume to give the stock momentum. That is unlikely to return until Microsoft reports earnings in late April. If geopolitical noise eases and investors refocus on fundamentals, MSFT could attract growth-oriented buyers looking for companies with clear upside potential.
Churchill Downs: The Derby Is Just the Beginning
By Chris Markoch. Publication Date: 4/24/2026.
Key Points
- Churchill Downs beat Q1 2026 earnings expectations, driven by strong growth in historical racing machines.
- The company’s $85 million Preakness Stakes IP acquisition adds high-margin licensing revenue and strategic control.
- With analysts seeing ~35% upside, HRM expansion remains the key driver for long-term CHDN stock growth.
- Special Report: Elon Musk already made me a “wealthy man”
In word association, Churchill Downs and the Kentucky Derby are almost synonymous. But for investors, it's worth getting familiar with Churchill Downs Inc. (NASDAQ: CHDN), the parent company that operates the racetrack that hosts the Kentucky Derby. It’s much more than an event-driven company and has significant growth potential.
That growth was evident in the company’s Q1 2026 earnings report. The company delivered records on both the top and bottom lines.
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See the small-cap stock powering the SpaceX buildout todayRevenue of $663 million beat estimates of $659.32 million and was 3% higher than the $642.6 million posted in Q1 2025, a quarter in which the company had missed estimates. Earnings per share (EPS) of $1.21 was 18 cents above forecasts and 14 cents higher year over year.
The Real Reason to Bet on Churchill Downs
Historically, the second quarter has been Churchill Downs’ strongest quarter, and with good reason — that's when the Kentucky Derby is run. Outside of that event, revenue from Churchill Downs Racetrack is relatively small; this quarter it accounted for $3 million, a year-over-year decline of $1 million.
That’s why the Derby, as iconic as it is, is a poor reason to invest in CHDN. The better reason is the company’s leadership position in Historical Racing Machines (HRM). These are essentially slot-machine–style terminals that let players bet on outcomes of previously run horse races, with identifying historical data removed so the result feels like live gambling.
There’s a method to the madness: HRMs are legally classified as a form of pari‑mutuel horse-racing wagering rather than casino gambling, which allows them to operate in states where traditional casinos are prohibited.
In the quarter, the segment generated $301 million in revenue, a $24 million increase year over year, driven almost entirely by HRMs. Expansion is a significant part of the growth story:
Marshall Yards Racing & Gaming in southwestern Kentucky opened Feb. 25, 2026.
Rockingham Grand Casino in Salem, New Hampshire, announced Jan. 12, is a $180–$200 million investment targeting a mid‑2027 opening.
The company is allocating $70–$80 million of its 2026 CapEx budget to Rockingham alone.
Churchill Downs Expands Its Racing Empire With Preakness Deal
The Kentucky Derby is the first and arguably the most iconic leg of horse racing’s Triple Crown, which also includes the Preakness Stakes and the Belmont Stakes.
Investors should note that on April 21, two days before the earnings report, Churchill Downs announced an agreement to purchase the intellectual property of both the Preakness Stakes and the Black-Eyed Susan Stakes for $85 million.
The acquisition gives Churchill Downs ownership of the trademarks and associated rights to the Preakness Stakes without requiring it to run the event or own Pimlico, the host racetrack. Instead, the company can collect an annual licensing fee from the state of Maryland and gain leverage over future broadcast rights, calendar negotiations, potential HRM licensing and the cultural narrative of American thoroughbred racing.
And it did so for less than one quarter of its current free cash flow (FCF) — an element that likely wasn’t fully priced into CHDN before the earnings release.
CHDN Stock Outlook: Can HRM Growth Drive the Next Leg Higher?
CHDN jumped more than 10% the day of its earnings report. Prior to the report, the stock was trading near its 52‑week low, which suggests investors may have seen the floor — but what’s the ceiling?
Analysts give CHDN a consensus price target of $135.60, implying about 35% upside. With that much potential, it’s fair to ask whether the Preakness IP rights are enough to push price targets higher.
Churchill Downs operates across four revenue streams: Live Racing, Historical Racing Machines, its TwinSpires wagering platform, and traditional casino gaming. Of these, Live Racing and Gaming don’t move the needle enough to build a standalone growth case — casino revenue actually declined year over year in Q1, weighed down by the exit from Louisiana. TwinSpires, which handles online and retail horse-racing wagering plus sports betting, is a steady contributor but not a high-growth engine.
That places the growth burden squarely on HRMs, a business that delivered $257 million in pari‑mutuel revenue in Q1 alone and is actively expanding into new states. The Preakness IP acquisition adds an intriguing wrinkle: if it accelerates HRM legalization in Maryland, as some analysts expect, Churchill Downs’ most important growth driver just gained new runway.
Back to the chart: CHDN was in a cautious recovery after a steep selloff from a December 2025 peak near $120. That decline produced a death cross, with the 50‑day simple moving average crossing below the 200‑day SMA.
Price action reclaimed the 200‑day SMA the day of the report — a meaningful move in a single session, especially with a fundamental catalyst. The key will be whether CHDN can consolidate around the 200‑day SMA near $92–$93. That could set the stage for a golden cross in a matter of weeks. Waiting for that confirmation may be prudent, but risk‑tolerant investors may consider initiating a position at these levels.
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