New York, January 30, 2026, 09:13 (EST) — Premarket
- MSFT tumbled 10% Thursday as investors zeroed in on AI-related spending and cloud expansion concerns.
- Microsoft reported a 39% jump in Azure revenue for the quarter, while capital expenditures surged to an all-time high of $37.5 billion.
- Traders are turning their attention to next week’s megacap earnings and the Feb. 6 U.S. jobs report as the next key risk indicators.
Microsoft (MSFT) grabbed attention ahead of Friday’s opening bell following a steep 10% drop the day before, closing at $433.50. That plunge wiped out about $360 billion in market capitalization. (Financial Times)
The sell-off spilled over into the wider market on Thursday, pushing the Nasdaq Composite down 0.72% and the S&P 500 lower by 0.13%, dragged by Microsoft’s heavy tech weighting. “Microsoft disappointed and there are some genuine concerns that AI investments will eat the software companies’ lunches,” noted John Praveen, managing director at Paleo Leon. (Reuters)
This matters now as the market has been bidding aggressively for “AI winners,” but earnings season is starting to feel more like a reality check. The core question? How quickly is cloud growth happening, and what’s the price tag on running the data centers to sustain it.
Microsoft reported a 17% jump in revenue to $81.3 billion for its fiscal second quarter, driven by a 39% surge in Azure and other cloud services. The company’s commercial remaining performance obligation—a backlog-like metric tracking contracted sales not yet booked as revenue—soared 110% to $625 billion. Microsoft also returned $12.7 billion to shareholders via dividends and stock buybacks. “We are only at the beginning phases of AI diffusion,” CEO Satya Nadella noted in the earnings release. (Microsoft)
Investors homed in on the spending figures. Microsoft reported capital expenditures — cash spent on data centers and equipment — at $37.5 billion for the quarter, a jump of nearly 66% from last year. About two-thirds of that went to chips. CFO Amy Hood warned that capex will dip slightly this quarter but raised concerns over rising memory-chip costs squeezing margins. On the earnings call, Nadella revealed M365 Copilot, the $30-a-month AI assistant for business users, now boasts 15 million annual users. Meanwhile, portfolio manager Eric Clark of the LOGO ETF highlighted costs, noting, “revenues are up 17% and the cost of revenues are up 19%.” (Reuters)
The risk is clear-cut. If capex remains high but Azure’s growth slows, cloud margins will likely feel the squeeze first, making it tougher to justify the stock’s premium multiple.
Capacity constraints and soaring costs for chips and memory add another layer of uncertainty, particularly if clients hold off on deployments or cut spending. Microsoft still needs to prove that Copilot can turn heavy usage into steady, reliable revenue—not just impressive demo figures.
The next catalysts are coming quickly. “For those companies where expectations have become very, very lofty, the onus is going to be on them to deliver,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. Traders are eyeing next week’s earnings from megacaps like Alphabet and Amazon, alongside the Feb. 6 U.S. jobs report, searching for signals on growth and the interest rate trajectory. (Reuters)
