TLDR
- Microsoft signed a $750 million three-year cloud deal with AI startup Perplexity, providing access to frontier AI models through Azure’s Foundry service.
- The agreement strengthens Microsoft’s position as a leading platform for AI development, hosting models from OpenAI, Anthropic, and xAI.
- Microsoft stock dropped 9.99% on January 29 after reporting slower Azure cloud growth and weaker margin guidance for Q2 FY26.
- Wall Street analysts cut Microsoft price targets following the disappointing results, though the stock maintains a Strong Buy consensus rating.
- The Perplexity deal represents Microsoft’s aggressive push to establish Azure as the premier destination for high-growth AI startups.
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Microsoft has secured a $750 million cloud agreement with Perplexity AI. The three-year deal brings the fast-growing AI search startup onto Azure’s infrastructure.
AI startup Perplexity just landed a $750M deal with Microsoft $MSFT to run on Azure – all while locked in a legal fight with its longtime cloud partner, Amazon $AMZN pic.twitter.com/9ws6zogs0i
— Trader Edge (@Pro_Trader_Edge) January 30, 2026
Perplexity will access frontier AI models through Microsoft’s Foundry service. The platform hosts models from OpenAI, Anthropic, and xAI in one place.
“We are excited to partner with Microsoft for access to frontier models from X, OpenAI and Anthropic,” a Perplexity spokesperson said. The deal lets Perplexity deploy a broad array of AI models for its search engine and commerce features.
Microsoft has promoted Foundry as the premier platform for AI deployment. Partnerships with top AI vendors bolster the service’s appeal to startups.
Microsoft Corporation, MSFT
The Perplexity agreement further cements Microsoft’s dominance in the AI infrastructure space. By hosting multiple leading AI models, Azure positions itself as essential infrastructure for companies building AI applications.
Azure Faces Headwinds
The deal comes at a challenging time for Microsoft’s cloud business. Shares plunged nearly 10% on January 29 after the company reported Q2 FY26 results.
Azure cloud growth came in slower than expected. Microsoft also provided softer margin guidance that disappointed investors.
Wall Street analysts responded by slashing price targets on the stock. The cuts blamed tepid Azure performance for the downward revisions.
Despite the selloff, Microsoft maintains strong analyst support. The stock has a Strong Buy consensus rating based on 33 Buy ratings and one Hold rating.
The average price target sits at $603.95. This implies 39.3% upside potential from current levels.
Microsoft stock has gained 4.5% over the past year. The recent drop represents a pullback after a period of steady gains.
Competing for AI Dominance
The Perplexity deal shows Microsoft’s strategy to become the go-to cloud provider for AI startups. Azure competes directly with Amazon Web Services for this lucrative market.
Perplexity valued at roughly $20 billion as of September 2025. The company competes against Google and OpenAI in the search space.
AWS remains Perplexity’s primary cloud provider for now. A spokesperson told Bloomberg that AWS is still the “preferred cloud infrastructure provider.”
However, the Microsoft deal provides Perplexity with necessary redundancy. Diversifying cloud dependencies helps startups scale operations and reduce risk.
Perplexity built its foundation on AWS and uses Amazon’s Bedrock service extensively. CEO Aravind Srinivas previously stated the company was “all-in” on Amazon’s cloud.
But relations between Perplexity and Amazon have soured. In November, Amazon sued Perplexity over its “Comet” shopping agent.
Amazon alleges the tool violates marketplace terms of service. The lawsuit creates an opening for Microsoft to capture more of Perplexity’s business.
Infrastructure Arms Race
The deal underscores the intense competition among cloud providers for AI workloads. Microsoft, Amazon, and Google are all vying to host the next generation of AI applications.
Perplexity has raised less capital than heavily funded rivals like OpenAI and Anthropic. Both companies have secured massive infrastructure deals with cloud providers.
Microsoft’s Foundry service will serve as a critical secondary engine for Perplexity’s operations. The partnership gives the startup access to multiple AI models without building everything in-house.
The $750 million commitment represents one of the largest cloud deals for an AI startup in 2026. It demonstrates Microsoft’s willingness to invest heavily in securing AI customers.
The three-year agreement locks Perplexity into Azure infrastructure through 2029.
