Microsoft (MSFT.US) stock price plunges 23% this year! Capital expenditure surge and AI concerns become two major "ailments" This month's earnings report will be a critical test

Zhitong Finance APP reports that some adverse factors that could pressure Microsoft (MSFT.US) stock price are unlikely to ease in the short term. In a latest report released on Monday, Goldman Sachs analyst Gabriela Borges said that this year, Microsoft’s stock has fallen 23%, mainly due to two factors. First, capital expenditures have continued to be increased, but Azure cloud business sales have not been revised upward in tandem. This has rekindled market concerns about return on investment and Azure’s competitive position relative to rivals such as Amazon Web Services. Second, the market has continued to worry that Microsoft’s enterprise productivity applications (for example, Office 365) may be impacted by competing AI products, such as Anthropic’s Claude Cowork. This concern is partly driven by the market’s view that the performance of Microsoft Copilot lags behind other AI tools.

Microsoft plans to release its earnings report after the close on April 29. Analysts added, “We believe that before the earnings report is released, risk and reward are roughly balanced. The near-term fundamentals outlook is mixed—good and bad—while investors’ expectations have also already been lowered.”

After Microsoft released a disappointing quarterly earnings report on January 28—when the report caused Microsoft’s stock price to drop by nearly 10%—Microsoft needs to rebuild investor confidence. The focus for investors is the company’s capital expenditures of as much as $37.5 billion, which will be used to build data centers that support its AI development. The market’s interpretation is that Microsoft’s future profit margins over the next few quarters will face pressure.

Wedbush technology analyst Dan Ives said, “Wall Street originally hoped to see less capital expenditures and a faster pace of monetization of cloud and AI, but reality is exactly the opposite. We have always believed this is a multi-year development process, and that Microsoft needs to continue focusing on data center construction because more and more customers are taking the path toward AI.”

However, Wall Street’s excessive focus on capital expenditures has obscured the fact that Microsoft has actually performed well in other areas. Microsoft reported solid results—revenue reached $81.3 billion, up 17% year over year. This performance was mainly driven by the company’s Intelligent Cloud segment, especially Azure, whose revenue grew 39%, as enterprises accelerate their transition to AI-driven infrastructure.

At the same time, Wall Street’s expectations for Microsoft’s earnings per share (EPS) have remained stable—which may reflect strong performance in its core business areas. JPMorgan analyst Mark Murphy said, “In our view, the bigger picture is that the scale of both of Microsoft’s two major core business pillars is approaching $100 billion—Azure business, despite capacity constraints, still maintains growth of about 30% or more; Microsoft 365 commercial business continues to grow at a mid–single-digit to high single-digit pace. In addition, the company has already delivered year-over-year growth of more than 20% in both operating revenue and earnings per share for three consecutive quarters.”