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.
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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.
In the first quarter of the current fiscal year, Microsoft reported revenue of $77.7 billion, up 18% year-over-year. Profitability improved alongside that growth. Gross margin dollars rose 18%, operating income climbed 24%, and adjusted earnings per share (EPS) reached $4.13, up 23% after accounting for the impact of investments in OpenAI. Free cash flow was strong, increasing 33% to $25.7 billion, reflecting MSFT’s ability to fund growth initiatives while returning value to shareholders.
One of the key highlights of the quarter was the surge in commercial bookings, which rose 112%. This performance was driven largely by Azure commitments from OpenAI, as well as continued momentum in securing large-scale enterprise contracts. Microsoft continues to see growth in the number of deals exceeding $100 million across both Azure and Microsoft 365. Importantly, these figures do not yet reflect the impact of an additional $250 billion in Azure commitments from OpenAI, suggesting further upside in future periods.
The company’s commercial RPO maintained momentum, rising to $392 billion, up 51% year-over-year. This balance has nearly doubled over the past two years, providing strong revenue visibility and confidence in sustained long-term growth.
Microsoft Cloud revenue reached $49.1 billion, up 26% year over year. Within this, the Intelligent Cloud segment generated $30.9 billion in revenue, growing 28%. Azure and other cloud services continued to accelerate, with revenue rising 40%, reflecting strong demand from Microsoft’s largest customers and continued strength in its core infrastructure offerings. The demand for Azure AI services remains strong, suggesting continued growth ahead.
With demand for cloud and AI services remaining strong, Microsoft’s cloud business is well-positioned to deliver continued growth. The company is expanding capacity, which should help ease supply constraints and support further revenue expansion. While elevated investment levels may pressure margins in the near term, Microsoft’s financial strength, solid execution, and long-term growth outlook continue to support a constructive view on the stock.
Analysts are upbeat and maintain a “Strong Buy” consensus rating on Microsoft stock.
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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
A medic holds a newborn baby in a city hospital in Mykolaiv, the site of heavy battles with Russian … [+] forces, Ukraine, Thursday, Nov. 3, 2022. (AP Photo/LIBKOS)
Copyright 2022 The Associated Press. All rights reserved.
Dispatches from Ukraine. Day 255.
As Russia’s attack on Ukraine continues and the war rages on, reliable sources of information are critical. Forbes gathers information and provides updates on the situation.
By Polina Rasskazova
Recently, American businessman Howard Buffett— son of billionaire investor Warren Buffett— met with the head ofthe Kharkiv Regional State Administration, Oleh Synyehubov. Howard Buffett discussed the financing of funds participating in the de-mining of the region, the restoration of critical infrastructure, and crisis assistance in case of emergency situations during the winter period.
Synyehubov noted that the main task is to speed up the de-mining process, because the Kharkiv region was heavily mined by Russian troops, and local residents of the de-occupied territories suffer from detonations almost every day. “The United States of America and the Buffett Foundation are reliable partners of Ukraine and the Kharkiv region in particular. Howard believes in our victory and constantly supports projects to restore our country. Appreciate this help,” said Synyehubov.
Iran’s foreign minister acknowledged that his country has supplied Russia with drones before Moscow’s war on Ukraine, the Associated Press reports. “We gave a limited number of drones to Russia months before the Ukraine war,” Iranian Foreign Minister, Hossein Amirabdollahian, told reporters after a meeting in Tehran on Saturday. As he acknowledged the shipment, Amirabdollahian claimed that Iran was oblivious to the use of its drones in Ukraine. He added that the Iranian side agreed with the Ukrainian foreign minister that Ukraine would provide any evidence about Russia’s use of Iranian drones in Ukraine. There has been direct evidence in recent weeks of Iranian drone technology being used by Russian forces against Ukrainian military and civilian targets.
Russia has already lost twice as many planes in Ukraine than in it did during its 10-year war in Afghanistan. “During the full-scale aggression, defenders of Ukraine destroyed twice as many Russian aircraft as the Soviet Union lost during the 10-year war in Afghanistan — 278 russian aircraft in Ukraine against 118 Soviet aircraft in Afghanistan,” reported the Commander-in-Chief of the Armed Forces of Ukraine, General Valerii Zaluzhnyi. “This war is the same shame for the Russian Federation and will cause its destruction!” he added.
Residents of the temporarily occupied city of Mariupol, in eastern Ukraine, put up posters to draw attention to the fact that they are freezing in their homes. “The children are frozen! Where are the windows?” “We are frozen. Help!”
Such banners and signs appear in occupied Mariupol. Mariupol City Council reports that people are driven to despair and forced to cry for help. Mariupol’s occupied authorities have not started the heating season despite the fact that at night the temperature outside is below freezing. People are waiting for action from the authorities with dying batteries and broken windows, although the Russian media talk about the distribution of new apartments and the beginning of the heating season in Mariupol.
Head of the Office of the President of Ukraine, Andriy Yermak, held a briefing with the US President’s National Security Adviser, Jake Sullivan. At the briefing, they discussed the issue of providing Ukraine with air defense equipment as soon as possible and about the exchange of prisoners and the involvement of international organizations in this process.
Ukraine received confirmation of unwavering support from the United States until it gains victory over the aggressor. “The United States is a very important partner of ours, which provides tremendous support. And today, once again, we received confirmation of unwavering support for Ukraine. Our friends and partners are with us until our victory,” said Yermak.
On The Culture Front.
Evgeniy Maloletka, a Ukrainian photographer, and his colleague,Mstyslav Chernov, will show photos and videos from Mariupol, Ukraine—the southern city destroyed by Russian forces, currently occupied by Russia — from November 9th through the 20th, at Howl! Arts!, 250 Bowery Street, New York. Maloletka and Chernov were the two journalists in Mariupol whose photos were on news pages all over the world and they received numerous awards. One of the most noticeable photos is the image of a women in labor during Russian bombing in a maternity ward in March, 2022.
New York’s Ukrainian Institute of America celebrates Solomea Krushelnytska, one of the greatest opera singers from Ukraine, who sang lead roles for early 20th century operas (such as Puccini’s Madame Butterfly) and toured in the most famous venues all over the world. Krushelnytska suffered directly from the Nazi and Soviet regimes which greatly affected her life in Ukraine. A music concert, including songs from Krushelnytska’s repertoire, and an art show will be held on November 18th.
Star Wars actor Mark Hamill, known for his role as Luke Skywalker, sent 500 drones to Ukraine to combat Russian aggression earlier this fall. He serves as an ambassador for Ukraine’s “Army of Drones” project.
