ReportWire

Tag: Capital Expenditure

  • Should You Buy Microsoft Stock Despite Its Ballooning CapEx?

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    Microsoft (MSFT) stock has lagged several of its big-tech peers over the past three months, which comes as a surprise given the company’s consistently strong financial results over the past several quarters. The primary factor weighing on Microsoft shares is growing concern about its rapidly expanding capital expenditure (CapEx), particularly amid fears of an artificial intelligence (AI) bubble.

    During the first quarter of the current fiscal year, Microsoft spent $34.9 billion on CapEx, well above its earlier guidance of $30 billion. This sharp increase reflects surging demand for the company’s cloud and AI offerings, especially across its Azure platform. The company said that about half of this spending was directed toward assets such as GPUs and CPUs, which are essential for handling rising workloads tied to cloud infrastructure, AI applications, and the replacement of aging server and networking equipment.

    www.barchart.com

    As demand continues to accelerate, Microsoft’s remaining performance obligations (RPO) have also grown, signaling a robust pipeline of future revenue. To support this momentum, the company has further ramped up investments in GPUs and CPUs. Management now expects CapEx to rise sequentially and has indicated that the growth rate in fiscal 2026 will exceed that of fiscal 2025, reflecting a multi-year commitment to scaling its AI and cloud capabilities.

    Despite the strategic rationale behind these investments, investor skepticism remains elevated. The concern is not whether Microsoft can execute, but whether the scale and speed of spending will translate into returns quickly enough to justify the investments. As fears of an AI bubble circulate across the market, even industry leaders like Microsoft are not immune to sentiment-driven pullbacks.

    Rising CapEx has become a point of concern for investors, particularly as Microsoft continues to invest heavily in AI. These investments may keep margins under pressure in the near term, even as the company continues to deliver ongoing efficiency gains. However, the broader financial picture remains compelling. Microsoft is executing well. Moreover, strong revenue growth, expanding earnings, and robust free cash flow reflect the resilience of its business model.

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  • Rheinmetall Joint Venture Invests $577 Million to Produce Propellant Powder in Romania

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    Rheinmetall RHM 2.85%increase; green up pointing triangle and Pirochim Victoria said they will invest over 500 million euros ($576.9 million) in a new propellant powder plant in Romania.

    The German arms maker and the Romanian defense company signed a deal Monday to form a joint venture, with Rheinmetall holding 51% and Pirochim owning the remainder, Rheinmetall said.

    Copyright ©2025 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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    Cristina Gallardo

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  • Mixed share reaction to megacap earnings burst, Meta droops

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    (Reuters) -Shares in three of the “Magnificent Seven” companies with significant investments in artificial intelligence were mixed in after-hours trade on Wednesday after the mega caps released third quarter earnings.

    Shares in Google-parent Alphabet rose 6.2% after the company beat Wall Street estimates for third-quarter revenue on Wednesday, as both its core advertising business and cloud computing unit showed steady growth.

    The cloud services and AI giant raised its capital expenditure forecast for the year to between $91 billion and $93 billion, compared with the estimates of $80.67 billion.

    But Microsoft fell 3.4% in extended trading even though the company reported blockbuster growth in its cloud-computing business that pushed its quarterly revenue past Wall Street estimates, showing businesses are still splurging on AI services despite fears of a bubble.

    The results highlight the growing returns from Microsoft’s massive AI investments.

    Shares in Meta fell more than 8% after it said it recorded a nearly $16 billion one-time charge in the third quarter related to U.S. President Donald Trump’s Big Beautiful Bill, and said its capital expenditure next year would be “notably larger” than in 2025.

    Meta has been doubling down on AI, CEO Mark Zuckerberg has personally led an aggressive talent hiring spree and has said that the company would spend hundreds of billions of dollars to build several massive AI data centers for superintelligence.

    COMMENTS:

    MICHAEL ASHLEY SCHULMAN, CHIEF INVESTMENT OFFICER, RUNNING POINT CAPITAL, LOS ANGELES

    “From a market perspective the earnings wave says the AI investments are being somewhat vindicated; they’re not wild hype anymore, but not fully matured either. From a geopolitical angle the tech sector isn’t just about widgets, it’s now about data wars, platform power, regulatory maneuvers, and global supply chain guts. And the investor in me says great results, but buckle up, because the real test is converting those massive outlays into steady predictable returns. AI is both overhyped and under penetrated, simultaneously a bubble and a base case depending on your time horizon. Machine as narrative velocity moves prices faster than cash flows can catch up, and the market algorithm rewards engagement over fundamentals. For boring detail: In aggregate the trio basically told us the artificial intelligence land grab is real and the shovels are very expensive, with Alphabet clearing the $100 billion quarter while lifting capital expenditures to feed cloud and search, Meta posting record sales but face-planting on a nearly sixteen billion dollar tax charge as it leans into a $70 to $72 billion build out, and Microsoft reaffirming that the enterprise cloud is the toll road of artificial intelligence with a fresh revenue beat and rapid Azure growth. Nonetheless, for all the good news out there, parts of the market are behaving more like a social network than a discounting machine as narrative velocity moves prices faster than cash flows can catch up, and the market algorithm rewards engagement over fundamentals.”

    STEVE SOSNICK, CHIEF STRATEGIST, INTERACTIVE BROKERS, GREENWICH, CONNECTICUT

    “From a broad market point of view, they’re sort of a push (not an index catalyst) because the good reaction in Alphabet is enough to offset the uninspiring outcome in Microsoft and the surprise tax loss at Meta. The reactions in Meta and Alphabet are currently greater than the implied volatility moves that were priced into weekly options, but not egregiously so, with Microsoft being a somewhat more subdued move.”

    BESPOKE INVESTMENT GROUP (emailed note)

    “Taken together, while these results weren’t all necessarily

    constructive for the stocks they show zero signal of a slowdown in the AI capex boom. Their combined capex rose $14bn QoQ or more than 22%, (the same pace as last quarter) and is up 88% YoY.”

    (Compiled by the Global Finance & Markets Breaking News team)

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  • Japan-U.S. Outline Investment Plan; Trump Says Toyota to Invest $10 Billion in U.S. Auto Plants

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    TOKYO—President Trump said Japanese auto giant Toyota is poised to invest $10 billion in auto plants in the U.S., coming as Tokyo released some details about the over half a trillion dollars it has pledged to invest in America as part of a trade deal.

    Trump made the remark while addressing U.S. military personnel in Japan, saying that Japanese Prime Minister Sanae Takaichi told him of the carmaker’s plan.

    Copyright ©2025 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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    Yang Jie

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  • These 5 tech stocks could let you play earnings season like a pro

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    These 5 tech stocks could let you play earnings season like a pro

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  • Virgin Galactic to Cut Jobs as Interest Rates Bite

    Virgin Galactic to Cut Jobs as Interest Rates Bite

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    Virgin Galactic said it would cut jobs and expenses to focus on producing its lower-cost Delta spaceships.

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  • Microsoft earnings top estimates, but stock falls as execs detail AI’s costs

    Microsoft earnings top estimates, but stock falls as execs detail AI’s costs

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    Microsoft Corp. easily topped profit and revenue expectations for its latest quarter, though its shares were moving more than 3% lower in extended trading Tuesday after the company discussed the year ahead.

    The technology giant has won favor on Wall Street for its positioning in the artificial-intelligence revolution, though Chief Financial Officer Amy Hood said on Tuesday’s earnings call that “even with strong demand and a leadership position,” Microsoft’s
    MSFT,
    +1.70%
    “growth from our AI services will be gradual.” Microsoft’s AI for its Azure cloud-computing business needs to ramp, and the company is working toward the general availability of its Copilot productivity product.

    Microsoft’s AI revenue impacts will thus be weighted toward the second half of the new fiscal year that just began, she continued. Meanwhile, she expects that Microsoft’s capital expenditures will rise sequentially each quarter “as we scale to meet demand signals.”

    Hood’s commentary came as Microsoft posted fiscal fourth-quarter results Tuesday afternoon that showed a 15% jump in revenue for the company’s cloud-computing segment, which it calls Intelligent Cloud. Revenue for the segment came in at $24.0 billion, while analysts had been anticipating $23.8 billion. The growth rate was 17% on a currency-neutral basis.

    The company said revenue for Azure and other cloud services was up 26%, or 27% in constant currency. Microsoft’s forecast had been for 26% to 27% in constant-currency Azure sales growth, while the company posted 31% constant-currency growth on the metric in the March period. The FactSet consensus was for 27% growth in constant currency.

    “While we believe the Street was hoping for Azure growth more in the ~28% range, we believe the consumption part of the business held up well,” Evercore ISI analyst Kirk Materne said in a note to clients.

    For the September quarter, Microsoft anticipates 25% to 26% in constant-currency Azure growth.

    The cloud migration is still in the “early innings,” Chief Executive Satya Nadella said on the call, while also highlighting a “new world of AI driving a set of new workloads.”

    “We think of that, again, being pretty expansive from a TAM [total addressable market] opportunity and we’ll play it out,” he continued, though the company is also up against the “law of large numbers” given the massive scale of its cloud business.

    The company generated fiscal fourth-quarter net income of $20.1 billion, or $2.69 a share, compared with $16.7 billion, or $2.23 a share, in the year-earlier period. Analysts tracked by FactSet were modeling $2.55 a share.

    Overall revenue for Microsoft climbed to $56.2 billion from $51.9 billion, whereas analysts had been expecting $55.5 billion.

    See also: Microsoft bulls are excited as company reveals pricing for AI offering

    Microsoft logged $18.3 billion in revenue for its productivity and business processes unit, up 10% from a year before, or up 12% in constant currency. That part of the business includes LinkedIn and both commercial and consumer versions of Office. Analysts had been looking for $18.1 billion.

    Revenue for the More Personal Computing segment, which includes Windows and Xbox content and services, dropped 4% to $13.9 billion and was off 3% on a constant-currency basis. The FactSet consensus was for $13.6 billion.

    Nadella, meanwhile, expressed optimism about the eventual opportunities brought upon by Microsoft’s Copilot offerings.

    “I do think people are going to look at how can they complement their [operating-expense] spend with essentially these Copilots in order to drive more efficiency and, quite frankly, even reduce the burden and drudgery of work on their OpEx and their people and so on,” he said.

    Evercore’s Materne called the overall results “solid” amid “a lot of macro headwinds.”  Microsoft’s investment story “gets stronger in [the second half of the calendar year] as some optical headwinds reverse and [comparisons] soften, and Microsoft’s position in the enterprise market continues to get stronger as customers look to consolidate spending,” he wrote.

    Read: Amazon finally is nearing a bottom on this key measure, analyst says

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  • Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

    Meta spending slams Facebook stock, but here are the chip stocks that are benefiting

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    Data-center stocks buoyed an otherwise down chip sector Thursday as shares of Facebook parent Meta Platforms Inc. cratered on torn-in-half profits and a hike in capital spending to fuel Mark Zuckerberg’s metaverse ambitions, prompting one analyst to ask if server chips can only go up now.

    As shares of Meta dropped as much as 25% Thursday, shares of Nvidia Corp.
    NVDA,
    +2.31%
    surged as much as 7%, compared with less than 1% declines on the PHLX Semiconductor Index
    SOX,
    -1.51%
    and S&P 500 index
    SPX,
    -0.69%    .

    Late Wednesday, Meta reported that quarterly profits fell by more than 50% and added that it expects 2022 capital expenditure of $32 billion to $33 billion, compared with a previous range of $30 billion to $34 billion. In 2023, the company said, it expects capital expenditure in the range of $34 billion to $39 billion, “driven by our investments in data centers, servers, and network infrastructure.”

    Meta
    META,
    -24.64%
    noted that an “increase in AI capacity is driving substantially all of our capital expenditure growth in 2023.”

    Soon after Meta made that announcement, Jefferies analyst Mark Lipacis said in a note that “positive capex commentary from Alphabet
    GOOGL,
    -2.80%    ,
    Microsoft
    MSFT,
    -2.03%
    and Meta” was all a positive for data-center equipment providers Nvidia, Advanced Micro Devices Inc.
    AMD,
    -1.92%    ,
    Broadcom Inc.
    AVGO,
    -1.26%
    and Marvell Technology Inc.
    MRVL,
    +3.61%    .
    Lipacis has buy ratings on all four stocks.

    Shares of AMD rallied as much as 5%, Broadcom shares rose as much as 2% and Marvell shares surged as much as 10% Thursday. Intel Corp.
    INTC,
    -3.69%
    shares were up a little more than 1% at one point ahead of its earnings report, scheduled for after the close Thursday.

    Opinion: Facebook and Google grew into tech titans by ignoring Wall Street. Now it could lead to their downfall

    Jefferies noted that Meta’s capital expenditure for 2023 alone charts a 12% year-over-year hike at midpoint, compared with the Wall Street consensus of $29 billion, or a 5% year-over-year decline.

    “We sense investor caution around Nvidia’s datacenter business this quarter, but we expect all four [equipment providers] to discuss positive datacenter trends this earnings season,” Lipacis said, noting he was a buyer of Nvidia stock “in front of its earnings call.”

    From the perspective of the chip industry — which has gone from a two-year global chip shortage to a sudden glut in a matter of months as PC and consumer-electronics demand has dropped sharply, causing chip fabricators to pump the brakes on investments in new capacity — Lipacis questioned whether the glut will ever reach data-center sales, as many have feared.

    “The most common comment we hear from investors on Nvidia is ‘the Datacenter Shoe has to Drop,’” Lipacis said, noting that his data shows that the shoe has already dropped and an uptick is on the horizon.

    Lipacis explained that data-center sales from Nvidia, AMD and Intel combined declined to $10.5 billion in the second quarter from $12 billion in the fourth quarter of 2021 and that he is modeling another $10.5 billion quarter in the third.

    “This looks consistent with the pattern since 2017 of 4-to-5 qtrs above trendline, followed by 2-to-3 qtrs of below trendline ‘digestion,’ i.e., it looks like the datacenter shoe has already dropped,” Lipacis said.

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