Microsoft Faces Securities Lawsuits Over Copilot AI Failures

Two law firms have filed securities fraud class action lawsuits against Microsoft Corporation, alleging the company concealed critical technical failures and poor adoption rates of its AI chatbot, Copilot. The litigation follows a 10% drop in Microsoft stock on January 28, 2026, which was triggered by disappointing second-quarter financial results and a sudden slowdown in Azure cloud growth.

The first suit, filed by Bleichmar Fonti & Auld LLP in the U.S. District Court for the Western District of Washington, highlights a significant gap between analyst expectations and reality. Microsoft reported only 15 million Microsoft 365 Copilot premium customers, and reports suggest weekly usage among licensed seats remained between 20% and 30%.

A second lawsuit filed by Levi & Korsinsky, LLP on behalf of investors who bought securities between May 1, 2025, and January 28, 2026, alleges deeper systemic issues. This complaint claims Microsoft misled the public regarding data siloing, interoperability, and user experience. It further alleges that Microsoft's proprietary AI models underperformed against competitors in benchmark tests and that the company diverted billions in capital expenditures from Azure services to support Copilot research and development, ultimately losing market share to rivals.