Microsoft Q1 Capex to Rise 66% to $146B as Shares Slide 25%
Microsoft shares dropped 25% in Q1, marking its worst quarterly performance since 2008, as capital expenditures surge from $88B to $146B for fiscal 2026. Azure growth decelerated slightly and Copilot has yet to gain substantial traction, intensifying investor concerns over ROI on AI investments.
1. AI Investment Surge and Capex Increase
Microsoft plans to raise capital expenditures from about $88B in fiscal 2025 to $146B in fiscal 2026 to support its AI infrastructure, with further capex increases expected through 2028 as it competes in the hyperscaler space.
2. Stock Slide to Worst Quarterly Performance Since 2008
Shares fell roughly 25% in the first quarter, underperforming its peer group and marking its largest quarterly decline since 2008, as investor concerns mount over the timing of returns on AI investments.
3. Azure Growth Deceleration and Copilot Adoption
Azure revenue growth has shown slight deceleration in the latest quarter, and Copilot has not yet gained meaningful customer traction, prompting internal efforts to refine the product roadmap.
4. Divergent Analyst Outlooks
Analysts remain split, with some flagging capped upside due to AI model challenges while others maintain buy ratings based on durable multi-year cloud and AI growth, as valuation trades at under 20 times forward earnings.