MW Microsoft just can't win Wall Street's trust. The stock is falling as spending fears linger.

By Emily Bary and Christine Ji

Despite strong cloud growth and a surge in Copilot adoption, Microsoft's latest results were overshadowed by an increase in AI spending

Microsoft expects capital expenditures of about $190 billion in 2026.

One message is clear after the rush of Big Tech earnings reports this week: Google has earned the right to spend a lot of money on artificial intelligence. Microsoft hasn't.

While Microsoft $(MSFT)$ gave investors some nuggets of good news on Wednesday afternoon, those weren't enough to dispel concerns about the large sums that the company is putting toward capital expenditures. Microsoft now expects to invest $190 billion this calendar year, with the bulk of that going toward chips.

For context, prior to the earnings report, the Wall Street consensus for 2026 capital expenditures was between $150 billion and $160 billion. And the company's 2025 capital expenditures, inclusive of finance leases, came out to $119 billion, according to FactSet data.

Microsoft shares are down over 5% in Thursday morning action, with investors still not convinced that the company's AI spending is yielding sufficient returns on investment or that the improved future growth prospects teased by management are significant enough.

"There are real doubts surrounding the appeal of its AI products, and it increasingly looks like Microsoft has squandered an early lead in enterprise AI with Anthropic now taking most of the action," Richard Windsor, an independent analyst with Radio Free Mobile, said in a note.

Read: It's time for a Microsoft 'reset.' Here's what investors should focus on now.

Microsoft's Azure cloud business grew 39% in constant currency during the latest quarter, and the company forecasts 39% to 40% growth in the current quarter before seeing a "modest" acceleration later in the year. The results were in line with Wall Street bogeys, but Microsoft's cloud momentum pales in comparison with Alphabet's $(GOOGL)$ $(GOOG)$. Google saw 63% cloud growth in the March quarter.

Management also disclosed more than 20 million Copilot paid seats, up from around 15 million paid seats disclosed the previous quarter. It's an encouraging sign of growth for Microsoft, as a perceived lack of Copilot adoption dampened sentiment last quarter, but it's perhaps not enough to reset the narrative.

Microsoft, like the rest of the hyperscalers, remains constrained by capacity as demand for AI compute exceeds supply. Management signaled that capacity constraints will persist through 2026.

"The company is seeing better progress on bringing new infrastructure online and improving fleet efficiency, which should help support growth," Evercore ISI's Kirk Materne wrote in a note to clients. On the earnings call, Microsoft said that its Fairwater data center is coming online six weeks ahead of schedule.

"We believe the forecasted acceleration in Azure and some encouraging trends around Copilot support the increasing capex spend though it could limit upside in the near term," Materne wrote.

For now, elevated capital expenditures have eaten into Microsoft's free cash flow, reducing it by 22% to $20.3 billion in the latest quarter. As Microsoft prepares to spend even more, free-cash-flow levels could take a bigger hit.

"We think this was a good set of results but appreciate the likelihood of ongoing debate around AI incrementality vs. a substantial capexrevision that looks set to weigh heavily on [free cash flow] in the quarters ahead," Deutsche Bank analyst Brad Zelnick wrote in a Thursday note.

Investors have been more forgiving of Google's AI spending. The company's explosive cloud growth "is showing the first signs of a real return being earned on the huge investments it is making in AI infrastructure," Windsor noted.

-Emily Bary -Christine Ji

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April 30, 2026 12:30 ET (16:30 GMT)

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