Business
February 10, 2026
Microsoft (MSFT) stock has fallen by 14% since January 28, 2026, despite the Redmond-based tech giant releasing a better-than-expected FY26 Q2 earnings report. The increased Microsoft (MSFT) stock pressure is driven by higher spending on AI. Investors are concerned about the aggressive investment, with many questioning how long it will take to see meaningful returns on Microsoft’s AI-related capital expenditure.
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AI CapEx Surge Sparks Debate on MSFT Stock Outlook and Azure Growth
Microsoft’s earnings report has beaten predictions, with revenue rising 17% to $81.3 billion. Operating income increased 21% to $38.3 billion, while diluted earnings per share climbed to $5.16, up 60%.
Despite posting strong quarterly numbers, the MSFT stock fell as attention quickly shifted to Microsoft’s AI capex. According to the transcript of Microsoft FY26 Second Quarter Earnings Conference Call, the capital expenditure stood at $37.5 billion, of which roughly two-thirds was used for CPUs and GPUs, highlighting the company’s focus on AI expansion.
Investors also raised concerns about Microsoft Azure. With increased spending on AI, supply chain pressures, and market competition, analysts believe Azure’s growth trajectory will be affected.
The MSFT stock downgrade by Stifel analyst Brad Reback added to the pressure, who cut ratings from “Buy” to “Hold,” and reduced the price target to $392 from $540.
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In a note to clients, Reback said,
We downgrade MSFT to Hold as we believe Street FY/CY27 revenue/EPS expectations are too optimistic. Given the well-documented Azure supply issues, coupled with Google’s strong GCP/Gemini results this evening and growing Anthropic momentum, we believe near-term Azure acceleration is unlikely. Additionally, FY27 is likely to have less in-period rev-rec as FY26 befitted from several product cycles, both a revenue and margin headwind.
Reback then noted,
Given this, as well as the expectation that management’s capacity allocation to first party apps and internal R&D continues for the foreseeable future, we believe meaningful near term Azure acceleration is unlikely.
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Towards the end, Reback shared how Microsoft (MSFT) is well-positioned to navigate the AI landscape in the long term. He, however, cautioned about the short-term MSFT prospects and how Google’s increasing dominance could come in the way. The analyst added,
From a pure numbers perspective, as we have recently written, until either CAPEX growth slows below Azure growth and/or Azure posts a significant acceleration in its growth we do not expect the stock to re-rate.
At the time of writing, MSFT stock pressure appeared to be easing. The stock was trading at $413.72, up 3.13% in one day. However, concerns surrounding Microsoft’s capex and Azure growth are gaining momentum.
