NEW YORK, May 26, 2026, 12:02 (EDT)
- Microsoft shares are still under pressure, though its AI and cloud units continue to show growth.
- Investors are sizing up a planned $190 billion capital spending program for 2026 as they track signs that Azure and Copilot demand is picking up.
- The OpenAI deal revamp, Microsoft Build coming up next week, and some fresh upbeat analyst calls are drawing attention again to the stock’s discount.
Microsoft shares fell late Tuesday morning, down $2.96 to $415.61. That put the company’s market cap near $3.10 trillion. Investors have been concerned about Microsoft’s AI spending this year, but recent comments suggested those worries could be already priced in. Stock is down for the year so far.
Microsoft is getting deeper into AI spending, raising fresh questions from investors about when that money will translate to profit and cash flow. CFO Amy Hood told investors the company plans to put about $190 billion into capital expenditures in 2026, with $25 billion of that set aside for higher component prices. Capital expenditure, or capex, covers outlays for things like data centers, chips, and servers.
Microsoft says demand continues to outpace supply. CFO Amy Hood told analysts the company is likely to stay capacity constrained “at least through 2026” as it adds more graphics-chip, processor, and storage capacity. She said Azure should see a slight pickup in growth in the second half of the calendar year. Microsoft
Microsoft’s March quarter beat gave bulls reason to stick around. Revenue hit $82.89 billion, climbing 18%, with net income at $31.78 billion, up 23%. Azure and cloud services revenue grew 40%. Microsoft Cloud came in at $54.5 billion.
Microsoft CEO Satya Nadella told investors the company’s AI business hit more than $37 billion in annual revenue run rate. He said the third quarter was a record, with the growth mostly coming from Microsoft Cloud. Nadella also said Microsoft added one more gigawatt of capacity in the quarter.
Microsoft’s AI story is now more about how the market is pricing it than whether it’s real. On Sunday, Seeking Alpha’s Daniel James said the capex risk “looks mostly priced in,” pointing to Azure’s growth, Copilot uptake, and the company’s valuation discount to Alphabet. Seeking Alpha
MarketBeat’s Chris Markoch said Microsoft trades at about 25 times forward earnings, under its five-year median of 34. He flagged three things investors are watching: the OpenAI deal changes, improved Copilot monetization, and the Microsoft Build event next week.
OpenAI’s new approach is still a major focus. Last month Microsoft said OpenAI can now run its products on any cloud provider. Microsoft holds a non-exclusive license to OpenAI’s IP until 2032 and will no longer pay OpenAI a revenue share. OpenAI continues to pay Microsoft a revenue share until 2030, but those payments are capped.
Shakeups from the reset are shifting the field. Reuters said the new terms let OpenAI get closer to Amazon and Google Cloud, though Microsoft sticks as the main cloud partner for OpenAI. Gil Luria at D.A. Davidson called the agreement “essential” for OpenAI’s enterprise push. Reuters
Wedbush’s Daniel Ives said the OpenAI shakeup is a “net positive,” MarketBeat reported, and hiked his Microsoft target to $575. Ives now sees about $6 billion in OpenAI payments to Microsoft for 2026, up from his earlier $4 billion call, MarketBeat said. MarketBeat
Microsoft is facing tough rivals. Nvidia keeps riding AI demand, while Alphabet and Amazon keep moving in cloud and AI. According to a Motley Fool piece on Sharewise, Microsoft is still trading 9% below where it was a year ago. Nvidia, Amazon and other big tech names have all moved higher over the same period.
Big investors have taken note. Reuters said this month that Bill Ackman’s Pershing Square opened a new position in Microsoft after shares fell and sold out of Alphabet to raise the cash. Ackman described Microsoft’s valuation as “highly compelling.” Matt Britzman, analyst at Hargreaves Lansdown, told Reuters that Microsoft was trading at one of its lowest valuation marks in a decade. Reuters
Execution is the near-term test. Microsoft holds its Build event June 2-3 at Fort Mason Center in San Francisco. The company is focusing on AI systems, developer tools, and agents—software for handling multi-step jobs for users.
Microsoft could end up spending ahead of its revenue. Cloud gross margins are softening as costs rise from AI gear and Copilot demand, with Microsoft already signaling a dip in Microsoft Cloud gross margin this quarter. If Azure growth fails to pick up, or OpenAI customers switch to other clouds, the stock may stay at a discount.
