Microsoft Sees 24% Q1 Slide While AI Capex Hits $146B
Microsoft’s stock plunged 24% in Q1, marking its worst quarterly performance since a 27% drop in Q4 2008. AI infrastructure spending will hit $146 billion in fiscal 2026, up 66% from $88 billion in 2025 and is forecast to reach $191 billion by fiscal 2028.
1. Worst Quarterly Performance Since 2008
Microsoft’s share price fell 24% in the first quarter, its steepest drop since a 27% decline in Q4 2008, making it the weakest performer among major tech peers. Investor concerns over near-term growth have driven the selloff, underscoring unease about software demand and margin pressures.
2. Accelerating AI Infrastructure Investment
The company plans to spend $146 billion on capital expenditures in fiscal 2026, a 66% increase from $88 billion in fiscal 2025. Estimates project this AI-related investment will climb to $170 billion in 2027 and $191 billion in 2028 as Microsoft races to expand hyperscale cloud capacity.
3. AI Competition and Cloud Growth Challenges
Investors worry that startups like Anthropic and OpenAI could divert customers away from Microsoft’s core offerings, potentially pressuring pricing and margins. Azure’s growth rate decelerated slightly in the latest quarter, and Copilot AI has seen limited traction, prompting an internal AI operational shake-up to boost adoption.