Microsoft’s AI-Driven Spending Surge Overshadows Strong Cloud Performance

Microsoft Corp. reported fiscal first-quarter revenue of $77.7 billion, exceeding analyst estimates as its cloud computing division delivered 26% year-over-year growth. The tech giant's commercial cloud revenue reached $49.1 billion while its Intelligent Cloud segment, including Azure, generated $30.9 billion - both surpassing Wall Street expectations.

Despite the strong performance, shares fell 2% after the company revealed a 74% increase in capital expenditures to $34.9 billion, with half dedicated to AI infrastructure. The spending spike reflects Microsoft's aggressive bets on artificial intelligence hardware as demand for Azure AI services grows, though investors showed sensitivity to the scaling costs.

The results follow recent Azure service outages that temporarily disrupted global operations, coming just one week after similar disruptions at Amazon's AWS cloud division. Microsoft's earnings per share ROSE to $3.72 from $3.30 year-over-year, beating the $3.68 consensus estimate.