Microsoft $MSFT ( ▼ 0.74% ) delivered better-than-expected quarterly results, but the stock fell after investors focused on the company’s rapidly rising capital expenditures tied to AI infrastructure.
Revenue for the quarter came in at $81.3 billion, topping forecasts, while earnings per share also beat expectations. Despite the solid performance, the market reaction was negative as spending ramped faster than many had anticipated.
Azure demand stays strong
Microsoft’s cloud business remained a major growth engine. Revenue from its Intelligent Cloud segment, which includes Azure, climbed sharply year over year. The company’s commercial backlog also ballooned, reflecting heavy demand for future cloud and AI services, with a sizable portion tied to OpenAI-related commitments.
That suggests customers are still locking in large, long-term AI workloads, even as questions linger about how quickly capacity can be brought online.
Capex steals the spotlight
The main concern was capital spending, which jumped significantly as Microsoft continues building out data centers and AI infrastructure. Investors are increasingly scrutinizing whether this level of spending will generate sufficient returns and how long elevated outlays will last.
Microsoft’s other businesses were more mixed. Productivity software continued to grow steadily, while its personal computing segment, including Windows and gaming, declined modestly.
The takeaway for investors: demand for Microsoft’s AI and cloud services remains strong, but the cost of chasing that growth is rising fast, and the market is still deciding how much it’s willing to pay for that future.