Microsoft’s record AI capex spooks investors as Azure jumps 40% in Q1; shares slip in after-hours trading amid plans for even higher spending this year. Founded in 1975, Microsoft morphed from Windows/Office software into a cloud-and-AI giant. Azure now anchors growth, complemented by Copilot AI services and a deep OpenAI partnership. Microsoft reported a blowout fiscal Q1, with revenue up 18% to $77.7B and Azure and other cloud services jumping 40% year over year, topping expectations. Yet investors focused on the price tag: capital expenditures surged to a record ~$34.9B in the quarter, and management said spending will be higher for the full year, sending shares down in extended trading. up 18% to $77.7B $77.7B 40% record ~$34.9B higher for the full year “Our planet-scale cloud and AI factory… is driving broad diffusion and real-world impact.” — Satya Nadella, CEO. CEO Satya Nadella said Microsoft’s “planet-scale cloud and AI factory” is driving broad customer adoption, adding the company will “increase our investments in AI across both capital and talent” to meet demand. The heavy outlays reflect continued build-outs of data centers and purchases of advanced chips to alleviate capacity constraints as AI workloads scale. Satya Nadella planet-scale cloud and AI factory increase our investments in AI across both capital and talent AI workloads scale “We delivered a strong start to the fiscal year… Continued strength in the Microsoft Cloud reflects growing demand for our differentiated platform.” — Amy Hood, CFO. On the earnings call, CFO Amy Hood underscored the step-up: “Total spend will increase sequentially, and we now expect the FY’26 [capex] growth rate to be higher than FY’25.” Guidance for next quarter revenue of $79.5B–$80.6B was slightly above the Street, but investors zeroed in on cash needs for AI infrastructure. Amy Hood Total spend will increase sequentially, and we now expect the FY’26 [capex] growth rate to be higher than FY’25 Total spend will increase sequentially, and we now expect the FY’26 [capex] growth rate to be higher than FY’25 $79.5B–$80.6B Despite the after-hours dip, Microsoft highlighted momentum across cloud: Microsoft Cloud revenue reached $49.1B (+26%), and commercial RPO rose 51% to $392B, signaling strong multi-year commitments even as markets question the near-term returns on unprecedented AI capex. $49.1B 51% $392B

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Microsoft’s Record AI Spending Sparks Investor Jitters

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