Microsoft delivered a solid earnings report on Wednesday with $81.3 billion in revenue for the quarter (up 17%), net income profits of $38.3 billion (up 21%), and a record-breaking Microsoft cloud revenue of over $50 billion.
But the stock was getting pounded on Thursday as investors worried about how much the tech giant was spending to build out its cloud and questioned whether that investment would pay off. Microsoft CEO Satya Nadella says the answer to that question is yes — and spent considerable time on the earnings call trying to make that point.
Microsoft has spent almost as much on capital expenditures in the first half of its current fiscal year as it did in all of the previous year. And the numbers truly are enormous: Microsoft spent $88.2 billion on capital expenditures last year and has spent $72.4 billion so far this year.
Much of that spend is to serve AI to enterprises and major AI labs, especially OpenAI, as well as Anthropic. The big question on investors’ minds is: Will the spending turn into more use and ultimately profits?
Investors are scared that Microsoft’s main enterprise cloud product, Azure, and its Microsoft 365 apps didn’t grow as fast as they wanted.
“The fact that BOTH Azure and the M365 segments fell a bit short is the key negative we’re hearing,” Wall Street analyst for UBS, Karl Keirstead, wrote in his research note on Thursday. (Keirstead isn’t worried about it, though, and recommends buying the stock.)
Still, a few months ago, news reports circulated that people didn’t really want to use Microsoft’s AI, despite Copilot being weaved into all kinds of Microsoft products.
Techcrunch event TechCrunch Founder Summit 2026: Tickets Live On June 23 in Boston, more than 1,100 founders come together at TechCrunch Founder Summit 2026 for a full day focused on growth, execution, and real-world scaling. Learn from founders and investors who have shaped the industry. Connect with peers navigating similar growth stages. Walk away with tactics you can apply immediately
Save up to $300 on your pass or save up to 30% with group tickets for teams of four or more. TechCrunch Founder Summit: Tickets Live On June 23 in Boston, more than 1,100 founders come together at TechCrunch Founder Summit 2026 for a full day focused on growth, execution, and real-world scaling. Learn from founders and investors who have shaped the industry. Connect with peers navigating similar growth stages. Walk away with tactics you can apply immediately
... continue reading