NEW YORK, Jan 29, 2026, 04:47 (ET) — Premarket
- Microsoft shares slipped roughly 5.7% in premarket trading following the company’s quarterly results released late Wednesday
- Investors focused sharply on a record capital spending bill aimed at AI infrastructure, alongside a cloud growth forecast that offered scant margin for missteps
- Traders are keeping an eye on whether Big Tech can boost AI spending without hurting profit margins
Microsoft shares slipped 5.7% to roughly $454 in premarket Thursday, rattled by concerns over the rising expenses tied to its AI strategy following the latest quarterly report. The stock had closed Wednesday slightly higher, up 0.2% at $481.63. (Public)
This shift is significant because investors have long seen Microsoft as a key indicator of enterprise AI demand. More are now setting stricter conditions: spending is acceptable, but only if growth stays on track. (Reuters)
Big Tech earnings this week reflect that tension, as investors question if rising AI spending can translate into higher revenue and profits. “Microsoft’s deep ties to OpenAI … introduce concentration risk,” warned Zavier Wong, a market analyst at eToro. (Reuters)
Microsoft reported a 17% jump in revenue to $81.3 billion for the quarter ending Dec. 31. Operating income climbed 21% to $38.3 billion. GAAP net income stood at $38.5 billion, with adjusted profit coming in at $30.9 billion. Adjusted diluted earnings per share were $4.14, the company disclosed. (Microsoft)
Cloud continued to drive growth. Microsoft Cloud revenue hit $51.5 billion, up 26%, with “Azure and other cloud services” climbing 39%, the company reported. It also returned $12.7 billion to shareholders via dividends and buybacks this quarter. (Microsoft)
Investors zeroed in on the bill fueling that expansion. Capital spending surged to $37.5 billion, soaring nearly 66% from last year, largely thanks to chips and data centers, Reuters reported. Microsoft also projected Azure growth between 37% and 38% for this quarter and signaled a slight slowdown in capital spending. Meanwhile, rising memory-chip costs are expected to pressure cloud margins over time. (Reuters)
Microsoft’s connection to OpenAI has returned to focus. The tech giant holds a 27% share in OpenAI and has lost its status as the startup’s exclusive cloud provider. Still, Microsoft keeps commercialization rights through 2032, according to the Associated Press. (AP News)
During the post-earnings call, CEO Satya Nadella revealed that Microsoft’s M365 Copilot, the $30-a-month AI assistant for businesses, now boasts 15 million annual users. However, an investor concern highlighted by Eric Clark, portfolio manager of the LOGO ETF, is that costs are rising faster than sales. “Revenues are up 17% and the cost of revenues are up 19%,” he noted, per Reuters. (Reuters)
However, risks remain. Should AI demand cool off, or if capacity constraints and chip prices squeeze margins for longer than anticipated, the spending Microsoft uses to defend its edge could weigh on profits and free cash flow. That’s especially true as competitors roll out their own models and agents within enterprise software.
Traders will be looking to see if dip buyers return to MSFT during Thursday’s U.S. regular session and whether management offers clearer guidance on spending and margin trade-offs as analysts process the earnings. The next major trigger for the broader “AI spending” theme hits later Thursday, when Apple is set to release results after the close. (Nasdaq)
