Track market-moving stories before they get noisy

Microsoft Corp (NASDAQ:MSFT) is set to report fiscal fourth quarter results this week, with UBS maintaining its ‘Buy’ rating while taking a more balanced tactical stance ahead of the release, citing expectations for higher capital spending alongside steady cloud demand.

Following recent conversations with Microsoft customers and partners, UBS wrote that Azure and Amazon Web Services demand "appears to be very healthy." However, the firm believes capacity constraints for external customers and early efforts to optimize AI token usage could limit the scope for meaningful upside to Azure guidance.

UBS also noted that recent GitHub Copilot pricing changes should provide a modest boost to Azure growth.

The firm raised its fiscal 2027 capital expenditure estimate to $261 billion from $234 billion, citing continued demand from model training workloads and memory cost inflation. It added that investors are increasingly focused on AI infrastructure spending after recent reactions to results from Oracle and Alphabet's Google.

On the productivity software side, UBS became more constructive on Microsoft 365, pointing to Copilot improvements and pricing changes across the Microsoft 365 Commercial Cloud business. The firm increased its fiscal 2027 Microsoft 365 Commercial Cloud growth forecast by 70 basis points to 16.2%.

UBS wrote that Microsoft shares have underperformed many peers this year, leaving investors cautious about rising AI investment, returns on AI spending and exposure to frontier AI models. It estimates investor expectations for fiscal 2027 capital expenditures are already in the $255 billion to $260 billion range.

"In our view, this set-up mitigates the downside risk even if AI capex were to rise and the H2 Azure guide was reaffirmed (not raised)," UBS wrote.

While trimming its price target to $480 from $510 to reflect weaker sentiment toward AI infrastructure stocks, UBS said Microsoft remains reasonably valued based on its AI monetization potential and expectations for steady mid-teens earnings growth.

Shares of Microsoft traded hands at $391 on Monday afternoon, down about 19% so far this year.

I keep hitting the buy button on Microsoft (NASDAQ:MSFT | MSFT Price Prediction) into every drawdown, and Wednesday’s fiscal Q4 earnings will not change that. The stock is down 20.72% year to date and 24.69% over the past year, and I have been adding the whole way. The reason is simple: this is the only megacap AI story where the capex bill arrives with a customer purchase order attached.

The Thesis in One Line Microsoft is being run like a B2B utility taxing the corporate world’s digital workflow. The capex looks less like a speculative gamble and more like a factory expansion to meet pre-ordered demand. Wall Street treated Alphabet like a consumer media giant taking a capital-intensive gamble on AI infrastructure. I do not think it will read the Microsoft earnings report the same way, and my portfolio is positioned accordingly.

The Receipts Last quarter, Microsoft’s AI business hit an annual revenue run rate of $37 billion, up 123% year-over-year. Commercial remaining performance obligations, the contracted backlog customers have already committed to spend, reached $627 billion, nearly doubling year over year. Azure grew 40%. That is what backs the $30.876 billion quarterly capex line, up 84.39% year over year.

The balance sheet still funds the buildout without stress. Debt-to-equity sits at 0.176 and interest coverage at 53.89x. Operating cash flow was $46.679 billion in a single quarter. Return on equity of 33.28% and operating margins of 45.62% tell me the returns on invested capital have not cracked under the spending. This is why I keep buying a 0.85% yielder that has raised the payout for two decades.

Why Not Alphabet Alphabet (NASDAQ:GOOGL) is the obvious alternative. Google Cloud grew 82% to $24.768 billion, which is real. The financing story is the problem. Alphabet’s Q2 capex hit $44.924 billion, free cash flow went to negative $5.855 billion, long-term debt more than doubled from $46.5 billion to $98.2 billion, the company raised roughly $70 billion in combined debt and equity, and the buyback got suspended. Shares fell 7.13% on the report despite the beat. Alphabet’s dividend yield is 0.54%, thinner than Microsoft’s, and I am less inclined to own the cloud growth if I have to underwrite the funding gap to get it.

The Real Risk The risk is that significant investments in products and services may not achieve expected returns. AI infrastructure depreciates fast, and enterprise adoption could slow. I take that seriously. What keeps my thesis intact is the $627 billion RPO. Microsoft is building capacity against contracts already signed, including the restructured OpenAI arrangement that added $250 billion in incremental Azure services commitments.

Forward Conviction Prediction markets put a 91% probability on another EPS beat Wednesday, with a 92.5% chance capex prints above $38 billion. I do not need the crowd to be right. I need the RPO to keep converting, Azure to keep compounding, and the dividend to keep growing. On the current earnings yield of 3.59% with a forward multiple around 23, I am paying a factory price for a toll booth, and I plan to keep buying it.

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Microsoft on Monday launched its first cybersecurity-specialized model alongside a new AI cybersecurity platform at a small event in San Francisco, taking a big swipe at major players in the space — namely Anthropic, Google and OpenAI.

The company describes MAI-Cyber-1-Flash as a model that’s built “to find challenging vulnerabilities in complex codebases.” The model is built to animate MDASH, Microsoft’s harness dedicated to software vulnerability identification and remediation.

The new security platform is dubbed Perception, and it’s designed to deploy teams of agents to assist with and automate various security workflows, including identifying and remediating bugs. The platform can also integrate with MDASH.

The company claims MAI-Cyber-1-Flash is significantly more powerful (and more cost-effective) than competitor models, based on its performance on an established AI cybersecurity benchmark.

“We’re very very excited to announce our results,” said Mustafa Suleyman, the co-founder of DeepMind and current CEO of Microsoft AI. “We have MAI-1 Cyber Flash binded [sic] with GPT 5.4 inside of the MDASH harness — which beats out Gemini, GPT 5.5 Cyber, GPT 5.6 Sol, and Mythos 5 on Cyber Gym, which is the primary benchmark that we all use. The golden benchmark.”

“We’re shipping this into production immediately,” he added.

Noting that hackers are increasingly using AI in their cyberattacks, Hayete Gallot, Microsoft’s vice president for security, described Perception as a way for enterprise defenders to “defend against AI with AI at the scale and speed that the attackers have.”

Perception uses agentic red teams, blue teams, and green teams. The red teams can provide detailed simulations of potential attacks — providing context about potential threat actors and the likely vulnerabilities that they might exploit. Blue teams are dedicated to detecting and triaging existing bugs, while green teams take “corrective actions” against those bugs.

Dave Weston, the lead engineer for Perception, described the platform as a massive efficiency upgrade for corporate defenders. “We’ve gone from this taking hours and hours of manual work from multiple specialized folks across the security organization — appsec hunters, remediation engineers, you name it — and in minutes, we have a fix for all of this. Not only do we discover the issues and prioritize them, but we have detection, posture fixing, and even a code fix.”

Though AI has offered new defensive capabilities to companies, its availability to cybercriminals has given rise to a dazzling array of potential threats.

Microsoft’s new security tools, which the company said will be available in preview on November 3, will enter an increasingly crowded field of AI cybersecurity solutions. Earlier this year, Anthropic launched Mythos, a security platform that was released to a small coterie of partner organizations through a program called Glasswing. OpenAI has also launched its own security solution in May through a program called Day Break.

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Lucas is a senior writer at TechCrunch, where he covers artificial intelligence, consumer tech, and startups. He previously covered AI and cybersecurity at Gizmodo. You can contact Lucas by emailing [email protected].

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2026-07-26T08:07:01.230Z

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Three years ago, Satya Nadella catapulted Microsoft to the front of the AI race and became "like a superhero," one recent former Microsoft executive said.

In February 2023, after betting early on OpenAI, the CEO unveiled Microsoft's AI-powered Bing search engine before a packed audience outside Seattle, and declared a war on Google's search dominance. "A race starts today," he said. Waves of adulation followed. When Nadella helped navigate OpenAI's board crisis later that year, Bill Gurley called it an "amazing shift in corporate reputation." CNN Business chose Nadella as the CEO of the Year.

Inside Microsoft and across the tech industry, Nadella was hailed for seizing the future. Now, his legacy is at stake.

Microsoft's stock is down more than 24% from 12 months ago, significantly worse than the rest of the Magnificent 7. Investors have grown increasingly skeptical that the company's multibillion-dollar AI bet will deliver. Copilot, Microsoft's flagship AI product, lags behind other AI tools like ChatGPT and Claude. LinkedIn has drawn criticism for becoming flooded with AI-generated hustleporn. Xbox's business is "not healthy," its CEO recently said, and undergoing layoffs and restructuring as it tries to justify the company's record-breaking $69 billion Activision Blizzard acquisition.

And inside the company, employees are questioning Microsoft's plans to spend a record $190 billion this year to build AI infrastructure. As generative AI changes how people work, write software, and consume information, three of the company's core businesses hang in the balance: Microsoft 365, GitHub, and Azure. Investors will get a report card on these challenges on Wednesday, when the company releases its fourth-quarter earnings results.

As AI adoption spreads through corporate America, every software company is fighting to fend off the so-called SaaSpocalypse. But the battle is particularly fraught for Nadella's Microsoft, which made an early and loud bet on AI to propel the company's future. Now the company's north star has also become a potential noose.

For decades, Microsoft's productivity software has been the default homeroom where knowledge workers start their day. They opened Word to write, Excel to analyze data, and PowerPoint to build presentations. Now, millions of those workers are beginning to do all these things directly inside AI tools. Gartner analysts earlier this year predicted AI would threaten to dethrone traditional productivity suites like Microsoft 365 and Google Workspace in a $58 billion market shakeup.

Microsoft executives point to continued growth in Microsoft 365 and increasing Copilot adoption as evidence customers still want Microsoft's products at the center of their workdays. "The M365 business is seeing tons of new adoption and M365 Copilot usage," one executive said, who said the company is specifically chasing computing capacity to meet the demand.

GitHub faces a similar challenge. Since acquiring the software development platform in 2018, the company has held a dominant position with developers and had an early advantage in AI coding through GitHub Copilot. And it continues to grow: The platform recently had its "best month ever," an executive told employees in internal meeting comments viewed by Business Insider, though he didn't say by what measure.

But upstarts have swarmed in, as millions of engineers have adopted Cursor — which SpaceX recently announced plans to acquire for $60 billion — and Anthropic's Claude Code. As Business Insider previously reported, executives have discussed internally the need to overhaul GitHub to better compete with those AI-native coding tools. AI demand has also strained Github. As AI usage surged GitHub has experienced dozens of major outages this year.

The company is also struggling broadly to keep up with the demand for compute capacity. Despite this crunch, Microsoft is raising salespeople quotas for selling its cloud computing platform, Azure, some by 30% this year, according to people familiar with the change.

Azure remains Microsoft's fastest-growing strategic business, but internally executives say it has become a constant balancing act. Demand for computing infrastructure has outpaced the company's ability to build new capacity, forcing Microsoft to make difficult decisions about where its resources go. Even with this year's $190 billion capital expenditures — largely to expand data-center capacity for AI workloads — executives say the company is still constrained.

Earlier this year, Chief Financial Officer Amy Hood suggested Microsoft was prioritizing scarce computing resources for its own AI products before allocating the remaining capacity to Azure customers.

"The first thing we're doing is solving for the increased usage in sales and the accelerating pace of M365 Copilot, as well as GitHub Copilot, our first-party apps," Hood said during Microsoft's January earnings call. "Then we make sure we're investing in the long-term nature of R&D and product innovation... Then what you end up with is the remainder going towards serving the Azure capacity that continues to grow in terms of demand."

Why would Satya prioritize growing Adobe over growing M365?Microsoft executiveIf Microsoft had allocated the GPUs that came online during the first half of its fiscal year to Azure instead of its own AI products, Azure growth would have exceeded 40% instead of 39%, Hood said. Microsoft previously reported $75 billion in Azure revenue for its 2025 fiscal year.

That earnings report triggered one of Microsoft's biggest post-earnings stock declined by more than 10% as investors questioned the company's slower Azure outlook despite record AI spending and growing concerns that Microsoft was diverting capacity away from cloud customers.

Executives who spoke to Business Insider say those tradeoffs have intensified.

Microsoft is so desperate for capacity that it's turning to competitors to help relieve some of those constraints. Following a series of GitHub outages, Amazon bailed Microsoft out. The company also explored leasing Oracle cloud infrastructure but Microsoft walked away due to security and compliance concerns.

Microsoft is now seeking additional cloud capacity from other providers, including evaluating Amazon and Google, according to people familiar with the discussions. "We are shopping for capacity everywhere," one of those people said.

While prioritizing internal services has a mixed reception on Wall Street, the strategy is clear within Microsoft.

"All of the supply is gone once you solve for frontier labs and our internal businesses like M365 and Microsoft AI," one executive said.

Those decisions have created difficult conversations internally.

"Why would Satya prioritize growing Adobe over growing M365?" the person said. "I have no idea how we're going to land that message with customers."

As the pressure on Microsoft's core businesses mounts, Nadella has been bearing that pressure down on his workforce, and reshaping the structure of the company and its leaders.

As Business Insider previously reported, Nadella promoted Judson Althoff to CEO of Microsoft's commercial business to free himself and the company's engineering leaders to focus more directly on AI. Althoff was previously Microsoft's longtime sales boss but the role gave him a bigger profile. In an internal memo viewed by Business Insider at the time, Nadella described the moment as "a tectonic AI platform shift."

The mounting pressure on Nadella has trickled down through Microsoft's ranks from the executive suite to the rank-and-file employee.

At the same time, Nadella has remade his inner circle. Business Insider previously reported that Microsoft effectively retired its traditional senior leadership team structure in favor of smaller, flatter leadership groups. AI CEO Mustafa Suleyman has narrowed his focus to Microsoft's superintelligence efforts, top Nadella lieutenant Rajesh Jha retired, longtime product and marketing leader Yusuf Mehdi is preparing to leave the company, and more executive changes are expected.

According to people familiar with the succession planning, Hayete Gallot, who recently returned to Microsoft from Google to lead the company's security business, is viewed internally as the long-term successor to Althoff as sales chief. Gallot previously worked for Althoff and left in what one executive told Business Insider was "not an amicable departure." Nadella recruited Gallot back to replace Charlie Bell, who moved into an individual contributor role focused on engineering quality. Rodrigo Kede Lima, who Microsoft just put in charge of a $2.5 billion AI sales unit, is also a rising star, one of the people said.

The changes extend beyond the executive suite. Business Insider has learned that Microsoft overhauled its performance review system this year, simplifying ratings into five categories while making performance distinctions significantly sharper.

Executives say the new process feels like a return to "stack ranking," the controversial system that evaluated employees relative to one another during the Steve Ballmer era. At the same time, managers have been instructed to reduce the number of employees in higher-level engineering roles as Microsoft continues flattening parts of the organization, emblematic of a broader hardcore work culture that's spread across Big Tech in the last few years.

"It's almost like the old era of Microsoft is back," one former executive said. "The old Windows era where you lead with a lot of fear and a billy club in your hand."

For years, Microsoft's greatest strength was that it owned where people worked and where developers built software. AI is beginning to challenge both assumptions at once. Now Nadella's legacy won't be defined by whether Microsoft can build the best AI, but by whether it can keep AI from eroding the businesses that made it one of the world's most valuable companies.

Ashley Stewart is a chief technology correspondent at Business Insider.

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Microsoft (MSFT +0.02%) has been a poor stock to own over the past year. It's down nearly 30% from its all-time high, although it was down around 35% at the lows of its sell-off. However, I think that could all change on July 29, when Microsoft reports Q4 earnings, which could kick-start the stock's long-awaited rebound. 

Microsoft's stock is undervalued and looks like a great buy right now. If the company reports soaring growth in a few key divisions, that could give the market exactly what it needs to see for a major rally in Microsoft's stock.

Image source: Getty Images.

All eyes will be focused on two items Microsoft is a huge company with a wide-ranging business spanning productivity software, gaming, hardware sales, and cloud computing. However, despite Microsoft's size, two factors will drive the response to the earnings report.

First is cloud computing growth. Azure, Microsoft's cloud computing platform, offers a glimpse into the strength of overall AI spending, as several companies, including OpenAI, run AI workflows on Microsoft's servers. As Azure's revenue rises, it shows that more computing capacity is coming online and that it's being contracted out as quickly as it comes online.

Last quarter, Azure's revenue rose 40% year over year. However, investors will want to see a significant acceleration in revenue this quarter.

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Microsoft's competitor in the cloud computing space, Alphabet, saw tremendous growth during its previous quarter. Google Cloud's Q2 revenue rose 82% year over year, a major acceleration from Q1's 63% growth. If Microsoft maintains its 40% growth rate, that may raise red flags, as it would show that Alphabet is expanding far faster than Microsoft. I doubt that happens, and if Azure can report rapid growth, that will be the first catalyst Microsoft stock needs to start a rebound.

The second, and maybe most important, factor will be the fiscal 2027 capital expenditure guidance. Alphabet's stock got hammered following earnings after it bumped up capital expenditures by $10 billion. If the market deemed Microsoft's spending unreasonable, a sell-off may ensue. However, Microsoft's spending has already been tempered compared to its peers, so I don't expect this to happen.

If Azure's growth rate comes in ahead of expectations and capital exposure guidance is in line, I think Microsoft stock is primed to soar after July 29. But if it misses either of these two projections, the stock could tumble even further.

Hayete Gallot, now executive vice president of Microsoft Security, speaks at a Microsoft event in France in 2024. (Microsoft Photo) GeekWire is profiling over the next few weeks some of the people and teams that are shaping the evolution of Microsoft in what we’re calling its “Microsoft 2.5” era.

AI has had an impact on just about every tech-product category, but especially security. Attackers are using AI; customers are looking to defend with AI. The goalposts keep shifting. “Agentic security” is now the holy grail, and Hayete Gallot, the newly minted executive vice president of Microsoft Security, is leading the charge toward it.

Gallot, a 16-plus-year Microsoft veteran who rejoined the company in February after a 1.5-year Google detour, replaced Charlie Bell, who came to Microsoft from AWS in 2021 and continues at the company as an individual contributor focused on engineering quality.

“Customers care about two things: solving for security and being able to afford it,” Gallot said when I asked during our interview this week why she came back to Microsoft.

“I am a problem solver. And an engineer at heart (and by training). Security is the most important problem right now — and Microsoft is the only place with all of the puzzle pieces to help our customers.”

Since her return, Gallot hasn’t been shy about shaking things up. As noted recently by The Information, at least nine corporate vice presidents who previously reported to Bell have left the company this year.

“We’re making changes to ensure we’re in the best formation to go after this opportunity,” she acknowledged.

“I’m motivated by doing the right thing for our customers, my teams, and tech outcomes,” she said. “I like to move quickly: days and weeks, not months and years, learning through execution, iterating rapidly, and adjusting based on real customer signals.”

The company isn’t starting from scratch. As of 2021, Microsoft claimed security was a $10 billion business for the company. By 2023, security had reached a $20 billion annual revenue rate, officials said.

Those claims haven’t been without controversy. Microsoft has built a huge business in finding and fixing security problems which some customers felt were of the company’s own making.

Microsoft has a wide-ranging and rather unwieldy security portfolio, encompassing identity management (Entra), endpoint protection (Defender), endpoint management (Intune), security information and event management (Sentinel), and compliance (Purview), among others.

In 2023, Microsoft introduced its Security Copilot set of AI analysis services that integrated with some of its existing security offerings. But a portal-based solution like Security Copilot doesn’t offer the kind of end-to-end coverage that an agentic security platform can, Gallot said.

The problem is that attackers are using agents, too. Customers need real-time insight into what’s happening in their environment, and the ability to act just as quickly, Gallot said.

Agentic security is about “taking the signals and turning them into a graph that is useful,” Gallot said. “If you’re trying to reason about 100 trillion signals, it’s not really effective.” The graph, she said, lets agents pick the right model for each threat and close the loop.

In practice, that means the system can quarantine a device or revoke access on its own, for example, rather than waiting for a human.

Microsoft’s core existing security products will continue to play a role as the landscape evolves, both spotting the problems and acting on them. Security Copilot isn’t going away in the process: “You’ll have Copilot and you’ll have agentic security,” she said.

The company’s new Agent 365 “control plane” — a central console for tracking every AI agent a company runs — fits in by letting customers see the “blast radius” of an agent, meaning everything a hijacked agent could reach, Gallot said. It’s similar in concept to Zero Trust, the “never trust, always verify” security model that limited how far an attacker could get with a stolen employee login, but applied now to agents rather than people.

So what exactly is this ‘agentic security’ thing? Microsoft has a whole website dedicated to the very topic.

Traditional AI security and agentic AI security are fundamentally different, Microsoft says. Agentic security doesn’t just protect models and training data; it also can protect tools, workflows, memory, connected systems and more. Because agents can take action, the potential positive and negative stakes are higher.

While AI has helped businesses make strides in finding and fixing vulnerabilities, it hasn’t gone much beyond that. Microsoft introduced its multi-model agentic scanning harness (MDASH) as its first step into the agentic security space, Gallot said.

The company used MDASH internally to boost finding and fixing Windows security issues, and it is now making it available to select customers in an expanded preview. MDASH will allow customers to use the best model for the right task to secure all different types of code bases, she said.

Microsoft is rumored to be readying a more comprehensive agentic security offering, of which MDASH is likely just one piece.

Microsoft is far from the only one doing this. AWS, Anthropic, and OpenAI are offering security tools on their platforms, and dedicated security vendors are building their own agentic platforms.

Microsoft has the advantage of scale in the enterprise. The question is whether Gallot and her new leadership team can turn that scale and emerging AI tools into both a bigger business for the company and better protection for its customers.

I keep buying Microsoft because it is the only hyperscaler I trust to own both ends of the AI supply chain: the software everyone already pays for, and the electrons that will decide who actually gets to run the models. That combination is why my finger keeps hitting the buy button, and it is why the recent drawdown feels like a gift rather than a warning.

Here is the setup. Microsoft (NASDAQ:MSFT | MSFT Price Prediction) is down 17.39% year to date and 21.39% over the past year, yet the business underneath it just posted its fourth consecutive EPS beat with $4.27 against a $4.07 estimate. Revenue climbed 18.3% year over year to $82.89 billion. The market is punishing capex. I am accumulating.

The Three Data Points That Keep Me Buying First, the demand signal. Commercial remaining performance obligations reached $627 billion, up 99%. That is contracted, signed, non-cancellable future revenue that nearly doubled in a year. Azure grew 40%, and the AI business alone crossed a $37 billion annual run rate, up 123% year over year. Satya Nadella framed it plainly on the call: “Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year.”

Second, the quality of the compounding. Return on equity sits at 33.28%, operating margin at 45.62%, gross margin at 68.82%. Debt to equity is 0.176 and interest coverage runs 53.89x. This is a fortress funding a build-out. Shareholders got $12.7 billion returned in a single quarter, up 32% year over year.

Third, and this is the part that turns a good business into a moat: energy. By aggressively funding nuclear restarts, SMRs, and grid-permitting AI, Microsoft turns energy from an external existential risk into a proprietary moat, ensuring its data centers stay powered while turning the energy transition into a software-driven profit center. The LBNL projection has data centers consuming between 6.7% and 12% of U.S. electricity by 2028. Power is the bottleneck now. Microsoft is buying its way to the front of that line.

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Why Not Amazon, Alphabet, or NVIDIA Amazon and Alphabet run capable clouds. Neither owns a roughly 27% stake in OpenAI worth about $135 billion, with IP rights extended through 2032 and a $250 billion incremental Azure services commitment from the counterparty. That is a structural revenue lock the other hyperscalers cannot replicate by writing a check. NVIDIA is the pick-and-shovel play, and I own picks and shovels elsewhere. I would rather own the landlord collecting the rent under a contracted backlog than the supplier selling into a replacement cycle.

The Real Risk Capex is the real concern. It hit $30.88 billion in a single quarter, up 84.39% year over year. A widely shared r/investing post argues AI infrastructure depreciates faster than railroads or fiber, with chips obsolete in about two years, and it landed hard because it is partly true. My answer: the $627 billion RPO is contracted revenue against those assets. If the backlog stops growing, I will reassess. It is still doubling.

Why I Keep Buying From Here Over ten years, Microsoft returned 695.26%. Long-term compounders tend to reward holders who look past single-quarter noise. I keep buying Microsoft because it is quietly building the one thing the AI era cannot manufacture on demand: guaranteed power under a signed contract.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

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At $390, Microsoft (NASDAQ:MSFT | MSFT Price Prediction) looks compelling to contrarians. The AI capital spending panic dragging the stock lower looks more like a setup than a warning sign. The stock has shed roughly a fifth of its value over the past year despite four straight earnings beats, giving contrarians a rare opening on a business whose contracted backlog is nearly doubling.

Microsoft sits at the center of enterprise AI adoption. Azure, Microsoft 365, and the restructured OpenAI partnership feed a single cloud franchise that produced $54.5 billion in Microsoft Cloud revenue last quarter, up 29% year over year. Shares have derated hard, sliding from $552.51 at the Q4 FY25 filing to $390.34, a trajectory that maps almost perfectly to escalating quarterly capex.

The Backlog Is Doing the Talking Commercial remaining performance obligations reached $627 billion, up 99% year over year. That is contracted revenue backed by signed customer commitments. Microsoft’s $190 billion planned calendar 2026 capex is building against signed obligations competitors do not hold.

Monetization is showing up. AI annual run rate hit $37 billion, growing 123%, while Azure ran at 40% growth and Copilot seats climbed 250% year over year. Amy Hood told analysts, “We remain confident in the return on these investments given higher demand signals and increasing product usage.” Return on equity of 33.28% and operating margin of 45.62% confirm spending has not broken profitability.

What the Capex Skeptics See The bear case is real. Q3 capex jumped to $30.88 billion, up 84.39%, and full-year FY25 free cash flow already declined 3.32% as reinvestment accelerated. At a P/E near 28 and P/FCF around 40, Microsoft is priced for the AI story to compound.

OpenAI-related losses widened to $3.1 billion in Q1 FY26 from $523 million a year earlier, and OpenAI is no longer exclusive to Azure for non-API products. More Personal Computing shrank 1%, and insiders have been net sellers across 33 recent transactions. If Azure decelerates below the high 30s, multiple compression accelerates.

Why Patience Has a Case Composite sentiment sits at 42.91, neutral with a 7-day decline of 19.38 points, and Polymarket assigns only a 44.5% probability that shares close above $390 by month-end. The next Azure growth print and Q4 capex disclosure land within days. A guide toward the “over $40 billion” quarterly capex range without matching revenue acceleration would validate the bear thesis. Confirmation of Azure holding 40% or expanding operating margin tips the picture the other way.

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The Numbers Behind the Setup Shares trade at $390.34, down 18.93% year to date and 22.13% over the past year. The S&P 500 gained 9.6% year to date and 18.85% over the same twelve months. The gap is roughly 40 points of relative underperformance during accelerating fundamentals.

Consensus analyst target sits at $557.79, implying 43% upside. The full-chain put/call ratio of 0.44 shows options traders are not positioned for further crash, and Polymarket puts 89.5% probability on a Q4 earnings beat.

At $390, the Contrarian Setup The path to price appreciation is mechanical. A $627 billion contracted backlog converts to revenue on schedule, and management has committed the capacity to service it. Hood said Microsoft expects “another year of double-digit revenue and operating income growth in FY ’27” and supply will “remain constrained at least through 2026.” Constrained supply against contracted demand creates a favorable pricing environment.

Buying a business earning a 33.28% return on equity with interest coverage above 53 times at a P/E in the high 20s reflects a market multiple for elite compounding on a stock that has already given back the froth. Reddit’s most engaged recent post asked whether “MSFT at $385 an absolute steal right now” and sustained bullish traction for nine days running.

The thesis breaks if Azure growth prints below the mid-30s, if capex intensity climbs without matching bookings, or if OpenAI losses meaningfully compress consolidated margins. None are visible in current data. The market is pricing spending as sin while the customer is signing the check, and that gap defines the contrarian opportunity.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

Contact [email protected] for any questions or corrections.

by Kurt Schlosser on Jul 22, 2026 at 8:22 amJuly 22, 2026 at 8:22 am

(GeekWire File Photo / Todd Bishop) Microsoft is putting $60 million behind the U.S. Department of Energy’s Genesis Mission, a push to use artificial intelligence to speed up scientific research across the government’s 17 national labs.

The company’s investment is split into two pieces: $40 million in Azure cloud computing and AI credits over three years, and $20 million for engineering and deployment help to get DOE researchers actually using the tools, Microsoft said in a blog post Wednesday.

Microsoft is also launching a new internal group called SPARK — Scientific Partnership Advancing Research & Knowledge — to serve as the single point of contact between the company and DOE on Genesis Mission work. It’s meant to combine Microsoft’s program management, engineering, security and research teams into one coordinated effort, instead of leaving individual labs to navigate Microsoft on their own.

President Trump created the Genesis Mission through an executive order in November 2025, directing DOE to build a unified computing and data platform — since named the American Science and Security Platform — that connects the national labs’ supercomputers, AI tools and scientific datasets.

The order likened the effort’s urgency and ambition to the Manhattan Project, and the White House said it’s expanded into a whole-of-government initiative involving more than 15 federal agencies, backed by more than $5 billion in commitments.

Microsoft named four initial projects taking shape under the partnership, including work with Pacific Northwest National Laboratory in Richland, Wash., to speed up the discovery of new energy storage materials — cutting analysis that used to take years down to weeks — and autonomous lab work with Lawrence Livermore National Laboratory aimed at detecting biological threats earlier.

“We move faster together,” Chris Barry, president of Microsoft’s U.S. Public Sector business, wrote in the blog post announcing the commitment, framing the investment as both a “national security imperative” and economic opportunity for the U.S.

Microsoft isn’t the only Seattle-area cloud giant courting the Genesis Mission. Amazon Web Services was recognized by DOE as a Genesis Mission supporter in December, highlighting its work with Idaho National Laboratory on AI tools for nuclear reactor design, and the company launched its own Genesis Accelerator Initiative in February, offering up to $50 million in cloud credits for DOE-related research over three years.

Previous StoryNew Markdown rival: Open-source DGML format aims to turn docs into data that AI (and humans) can trust

NEW YORK, July 21, 2026 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against Microsoft Corporation (“Microsoft” or the “Company”) (NASDAQ: MSFT). Such investors are advised to contact Danielle Peyton at [email protected] or 646-581-9980, (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased. 

The class action concerns whether Microsoft and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. 

You have until August 11, 2026, to ask the Court to appoint you as Lead Plaintiff for the class if you purchased or otherwise acquired Microsoft securities during the Class Period. A copy of the Complaint can be obtained at www.pomerantzlaw.com.   

[Click here for information about joining the class action]

On January 28, 2026, Microsoft announced disappointing results for its fiscal second quarter ended December 31, 2025.  First, during the quarter Microsoft’s Azure growth had slowed suddenly and fallen below analyst expectations.  During the related earnings call, CFO Amy E. Hood revealed that the slower Azure growth was primarily due to computational capacity constraints, as Microsoft had diverted CPU and GPU capacity to Copilot applications and AI-related R&D.  Second, Microsoft revealed that its capital expenditures had increased to $37.5 billion during the quarter, causing Microsoft’s capital expenditures for the first six months of its fiscal 2026 to increase to $72.4 billion compared to $88.2 billion for all of Microsoft’s fiscal 2025.  Third, Microsoft revealed, for the first time, that the number of paid Microsoft 365 Copilot seats totaled only 15 million to date, materially below analyst estimates and a fraction of the more than 450 million commercial Microsoft 365 users. 

On this news, the price of Microsoft stock fell nearly 10%.

Then, on February 3, 2026, The Wall Street Journal revealed, in an article titled “Microsoft’s Pivotal AI Product Is Running Into Big Problems,” that severe challenges and functionality issues had plagued Microsoft’s Copilot offerings, leading to Copilot losing market share during the Class Period to competing products such as Google’s Gemini.  The price of Microsoft stock continued to fall in the days after Microsoft’s second quarter 2026 earnings announcement as the market continued to digest the adverse news and sources such as The Wall Street Journal revealed new adverse information.

Thereafter, on March 17, 2026, The Wall Street Journal revealed in an article titled “Microsoft Seeks More Coherence in AI Efforts With Copilot Reorganization” that Microsoft was reorganizing its Copilot product teams to unify commercial and consumer versions partly in response to the challenges revealed by The Wall Street Journal’s prior reporting on Copilot’s problem-plagued development and disappointing customer adoption. 

On this news, the price of Microsoft stock continued to fall.

Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com. 

Attorney advertising. Prior results do not guarantee similar outcomes.  

CONTACT: 
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Pomerantz LLP 
[email protected] 
646-581-9980 ext. 7980 

As Mistral is expanding its AI compute capacity in Europe, the companies are expanding their strategic partnership with Microsoft's commitment to leverage part of this capacity, bringing Mistral's frontier and efficient models across Microsoft's AI platform and giving customers flexible deployment options from cloud to fully disconnected environments
 

Scaling Europe's AI compute capacity: Microsoft and Mistral are announcing a new agreement to expand AI infrastructure in Europe. Microsoft will leverage Mistral's expanded Europe-based GPU infrastructure to increase capacity for AI development and to support the delivery of MSFT's cloud and AI services. This represents a multibillion dollar commitment from Microsoft and an important way for Microsoft customers to benefit from Mistral's scientific and compute innovations. Integrating Mistral models into Microsoft enterprise products: Mistral Medium 3.5 and OCR 4 are now available in Microsoft Foundry, and Mistral Medium 3.5 is now in Microsoft Copilot Studio. This brings the benefits of Mistral's frontier, efficient and multilingual models to Microsoft customers globally, allowing developers to build, customize and operate AI applications. Giving enterprises greater control over AI at scale: Azure enables organizations to deploy Mistral models across cloud, cloud-connected and fully disconnected environments, while maintaining control over data, operations and business continuity.
  , /PRNewswire/ -- Microsoft Corp. (Nasdaq: MSFT) and Mistral on Tuesday announced a significant expansion of their strategic partnership to help enterprises and regulated industries adopt frontier AI with greater choice, control and operational consistency. The companies are bringing Mistral's frontier and efficient models across the Microsoft platform, including Microsoft Foundry, Copilot Studio and Azure, so customers can build and run AI across a spectrum of operating environments, from cloud-scale deployments to customer-controlled and fully disconnected operations.

Across Europe and other regulated markets, organizations want access to frontier AI while maintaining control over their data, operations and critical workloads. This partnership extends Microsoft's Sovereign Cloud approach by combining Mistral's frontier models with Microsoft's security, compliance and cloud-to-edge platform, giving customers greater choice in how and where they deploy AI.

"Europe should have access to the world's most capable AI without compromising control over their data, operations or digital future," said Brad Smith, Vice Chair and President, Microsoft. "By bringing Mistral's frontier European models into our sovereign cloud portfolio and enabling them across public cloud, cloud-connected and fully disconnected environments, we are honoring the European Digital Commitments we made and giving customers a trusted foundation for AI they can operate on their own terms."

"Our mission has always been to put frontier AI in the hands of every organization while keeping them in control of their technology," said Arthur Mensch, Co-Founder and Chief Executive Officer, Mistral. "With Microsoft as our partner, our models reach enterprises and public institutions at global scale — delivered through a platform trusted for the most demanding, regulated workloads and available everywhere our customers operate."

Europe's AI future: expanded GPU capacity

Underpinning the partnership is a new multibillion-dollar agreement focused on expanding AI infrastructure in Europe. Mistral is adding its GPU capacity, drawing on thousands of the latest NVIDIA Vera Rubin GPUs to increase AI compute availability for customers and provide a shared platform for training, inference and large-scale deployment.

The agreement strengthens Europe's AI infrastructure while helping Microsoft meet growing demand for cloud and AI services. Consistent with Microsoft's flexible approach to global infrastructure, which combines its own datacenters, leased facilities and strategic collaborations with third-party providers, it expands Microsoft's capacity footprint in Europe and supports the European Digital Commitments announced in 2025.

"Agentic AI is driving unprecedented demand for high-performance, energy-efficient AI infrastructure," said Ian Buck, Vice President of Hyperscale and High-Performance Computing, NVIDIA. "By deploying NVIDIA Vera Rubin systems at scale, Mistral and Microsoft will give customers the computing foundation they need to build and run the next generation of AI across Europe and beyond."

Frontier AI, enterprise ready: Mistral models in Microsoft Foundry and Copilot Studio

At the platform layer, Mistral's latest Medium 3.5 and OCR 4 models are now available in Microsoft Foundry, giving developers access to frontier models within a consistent environment for building, customizing and deploying AI applications. Mistral Medium 3.5 brings an open-weight model into a managed Azure environment, enabling developers and enterprises to build, customize and deploy AI applications with control, sovereign deployment options, and predictable, cost-efficient scaling. OCR 4 supports structured document-processing pipelines and agentic workflows, and both models can be applied across agentic applications, automation and domain-specific solutions using tools and workflows already established across the Foundry platform.

At the application layer, the companies brought Mistral's Medium 3.5 model to Copilot Studio, combining model flexibility with enterprise-grade governance, empowering teams to choose the best model for a given scenario while maintaining control over how and where data is processed.

One deployment experience across any environment: Microsoft Foundry and Foundry Local

Organizations can develop AI applications using the same models, tools, APIs and workflows across Microsoft Foundry and Foundry Local. This gives teams a consistent way to build, customize and operate AI applications regardless of where those applications ultimately run.

Microsoft Foundry provides the development platform for discovering, building and deploying models and agents in the cloud. Foundry Local extends that development and runtime experience to Azure Local, so organizations can bring AI closer to their data, users and operational environments. Together, they help reduce the need to redesign applications for each deployment scenario while giving customers more flexibility in how they meet sovereignty, latency and resilience requirements.

Flexible deployment with a common operating model: Azure and Azure Local

Organizations increasingly need different levels of operational control depending on workload sensitivity, regulatory obligations and mission requirements. Azure and Azure Local provide a common platform that supports AI deployments across a spectrum of operating environments:

Cloud: Azure-hosted deployments for cloud scale, agility and access to the latest platform innovation. Cloud-connected: Customer-controlled Azure Local environments that remain connected to Azure services and operations when needed. Fully disconnected: Azure Local deployments that can operate independently of external connectivity for highly sensitive, constrained or mission-critical environments. Across these operating models, customers can use Mistral models with a consistent platform and operational approach. This helps regulated organizations avoid a fragmented AI architecture while supporting the level of control, resilience and connectivity their workloads require. 

For regulated industries where strategic autonomy is required, this offers concrete advantages. These customers can apply AI to sensitive workflows while aligning data, operations and access controls to their specific requirements. Critical infrastructure providers can maintain AI capabilities where resilience and service continuity are essential. Manufacturing and industrial organizations can analyze production, quality and operational data locally where latency, IP protection, export controls, cybersecurity and supply-chain resilience can shape deployment requirements. Healthcare organizations can support AI-enabled workflows where privacy, data residency, clinical continuity and regulated data handling are foundational requirements.

What this enables for our customers

As part of the expanded relationship, the companies are aligning on a joint go-to-market plan and will pursue enterprise opportunities together across Europe and globally. Mistral and Microsoft are also expanding the partnership to accelerate customer adoption, by funding PoCs, offering Azure credits, and leading workshops to drive AI innovation with customers.

Organizations in financial services, manufacturing, healthcare and other regulated sectors are running AI in settings where control and resilience are mandatory. With this partnership, they can build AI applications in Microsoft Foundry and run them in Azure or on Azure Local, using Mistral models in cloud, cloud-connected and fully disconnected operating environments.

Microsoft and Mistral will continue working to serve customers as we innovate across the models, development experience, development platform and European AI infrastructure that make this possible.

Learn more

Learn more: www.mistral.com Discover Microsoft Sovereign Cloud: https://www.microsoft.com/en-us/sovereignty Learn more about Azure Local: https://azure.microsoft.com/en-us/products/local Learn more about Microsoft Foundry: https://azure.microsoft.com/en-us/products/ai-foundry Learn more about Microsoft Copilot Studio: https://www.microsoft.com/en-us/microsoft-365-copilot/microsoft-copilot-studio About Mistral

Mistral is a pioneer company in generative artificial intelligence, empowering the world with the tools to build and benefit from the most transformative technology of our time. The company democratizes AI through high-performance, optimized, and cutting-edge open-source models, products and solutions as well as end-to-end infrastructure with Mistral Compute. Headquartered in France and independent, Mistral defends a decentralized and transparent approach to technology, with a strong global presence in the United States, United Kingdom, and Singapore. Learn more at www.mistral.ai

About Microsoft

Microsoft (Nasdaq "MSFT" @microsoft) creates platforms and tools powered by AI to deliver innovative solutions that meet the evolving needs of our customers. The technology company is committed to making AI available broadly and doing so responsibly, with a mission to empower every person and every organization on the planet to achieve more.

SOURCE Microsoft Corp.

by Lisa Stiffler on Jul 20, 2026 at 10:35 amJuly 20, 2026 at 10:41 am

Melanie Nakagawa, Microsoft chief sustainability officer, left, speaking with GeekWire reporter Lisa Stiffler at a fireside chat at Seattle City Hall on July 17. (PNW Climate Week / Fer Sagastume Photo) Microsoft Chief Sustainability Officer Melanie Nakagawa faced a barrage of pointed questions from the audience Friday during a session at the annual Pacific Northwest Climate Week in Seattle.

Protesters challenged Nakagawa through most of the 30-minute session held in a conference room at Seattle’s City Hall, calling out the company’s use of fossil fuel energy sources to power its AI data centers and challenging Microsoft’s commitment to climate goals set years ago.

As a reporter covering sustainability issues for GeekWire, I moderated the session. Many of the issues raised by the crowd were on my list of questions for Nakagawa. The disruptions also included chants from protesters seated among attendees, at times going beyond climate issues to condemn Microsoft’s technology deals with Israel.

Security guards ultimately ushered some protesters out of the space, while others remained. Interruptions from the audience continued for all but the final 10 minutes of the session.

The event capped off Pacific Northwest Climate Week, which included conversations around the city and region about climate change solutions, policies and innovations.

Microsoft has for many years been viewed as an environmental corporate leader, setting an ambitious goal in 2020 to become carbon negative within a decade. It created an internal carbon tax — one of the corporate world’s largest — that charges individual Microsoft divisions for emissions from sources like air travel to fund climate-friendly initiatives. The company is credited with helping create and sustain the carbon dioxide removal sector, among other roles.

But the rapid expansion of AI data centers and their huge energy demands are undercutting Microsoft’s standing. The company recently released its annual sustainability report, disclosing that its carbon footprint grew 25% last year, moving it further from its 2030 target.

Microsoft CSO Melanie Nakagawa, left, and GeekWire reporter Lisa Stiffler before a fireside chat was derailed by protesters. (PNW Climate Week / Fer Sagastume Photo) One protester’s question was about a deal announced earlier this year in which Microsoft is partnering with Chevron to build a 2.7 gigawatt natural gas facility to power a data center campus in Texas. I asked Nakagawa how the company defends the agreement, and she pointed to the 4.7 gigawatts of renewable energy that Microsoft has supported in the state. I followed up by asking about the Redmond, Wash.-based company’s commitment to carbon dioxide removal (CDR) projects given recent reports about a pause on new deals.

Nakagawa was unable to answer before the crowd drowned her out with a call-and-response chant: “Microsoft, you can’t hide. We can see your dirty side.”

Another protester criticized the escalating pursuit of AI. “You’re selling us a product that we don’t even need, and we never should ask for,” he said. “No one wants AI. You’re destroying the climate with AI.”

I brought up legislation proposed earlier this year in Washington to mandate clean energy use and bring transparency to data center impacts in the state. Microsoft opposed and helped defeat the bill, though the company says it wants to work with lawmakers to pass rules next year. I asked what needed to change in the legislation for Microsoft to support it.

Nakagawa didn’t provide specifics, but noted that this year, for the first time, the company shared facility-level information in its annual report on electricity and water use for data centers worldwide.

“People want to know more about the data, and we believe you can have an honest and candid conversation with transparency and access to that information and data,” she said.

Given the obvious public concerns, I asked Nakagawa, “Do you really honestly believe that by 2030, the company can hit that carbon-negative goal?”

Nakagawa pointed to wide-ranging initiatives that are starting to help curb specific emissions, including investments to make Xbox devices lower carbon and financial support for the recent opening of a production plant in Moses Lake, Wash., for sustainable aviation fuel company Twelve.

“There are a couple areas where we’re seeing a lot of promising progress,” she said. “Look, this is going to be a hard target. We’ve not been at all shying away from the fact that this is a difficult goal.”

Microsoft Corp. (NASDAQ:MSFT) stock is trading higher by almost 1% on Monday as big-cap technology stocks advance in a broader risk-on session.

The Nasdaq has gained almost 1%, while the S&P 500 is up 0.33%. Technology is leading all sectors with a 0.9% gain.

Investors are also looking ahead to Microsoft’s fiscal fourth-quarter earnings on July 29, with Wall Street closely watching Azure cloud growth, artificial intelligence monetization and capital spending, according to a new Bank of America research note.

Azure Growth Remains The Top MetricBank of America reiterated its Buy rating on Microsoft and maintained its $500 price forecast, saying Azure’s growth trajectory will likely determine investor sentiment after earnings. The firm expects Azure revenue growth of 39.5% in constant currency, near the company’s guidance of 39% to 40%.

The analysts said demand continues to exceed available capacity, while Microsoft’s newly operational Fairwater data center in Wisconsin should help convert its large remaining performance obligation backlog into revenue.

The company ended the previous quarter with $627 billion in commercial remaining performance obligations, with management expecting about 25% of that amount to be recognized over the next 12 months.

Bank of America said Azure growth at or above guidance is likely necessary for the stock to perform well, while a miss could renew concerns about returns on Microsoft’s heavy AI investments.

AI Spending And Copilot Adoption In FocusThe brokerage expects Microsoft to report about $42 billion in fourth-quarter capital expenditures, including leases, up 74% year over year as the company continues expanding AI infrastructure. That spending is expected to pressure free cash flow in the near term.

Beyond infrastructure, analysts said investors will closely monitor adoption of Microsoft 365 Copilot and broader AI monetization.

Microsoft ended the previous quarter with 20 million paid Copilot seats after adding 5 million sequentially, while AI annual recurring revenue exceeded $37 billion, up 123% from a year earlier.

Bank of America views continued growth in those metrics as evidence that AI adoption is translating into incremental revenue.

Revenue Outlook And ValuationBank of America forecasts fourth-quarter revenue of $87.4 billion, up 14.4% from a year earlier, and earnings per share of $4.24, broadly in line with Wall Street expectations.

The firm also raised its fiscal 2027 and 2028 revenue and earnings estimates to reflect stronger Azure growth as additional AI capacity comes online.

The analysts said Microsoft’s valuation remains attractive, noting the stock trades at about 19 times their calendar 2027 earnings estimate, below its five-year average multiple of 29 times.

Price ActionMSFT Price Action: Microsoft shares were up 0.90% at $397.35 at the time of publication on Monday, according to Benzinga Pro data.

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Microsoft NASDAQ:MSFT shares fell 1.5% on Friday, extending a difficult year for the software giant as investors continued to weigh heavy artificial intelligence spending against the company's long-term growth prospects.

The stock has declined more than 20% in 2026 and nearly 23% over the past year, even as Microsoft has continued investing aggressively in AI infrastructure and Azure cloud services.

Several Wall Street firms revised their price targets this week ahead of Microsoft's fiscal fourth-quarter earnings report on July 29, while largely maintaining bullish ratings on the stock.

Wall Street lowers targets but maintains bullish ratingsCiti reduced its price target on Microsoft to $570 from $620 while maintaining a Buy rating.

According to reports, the firm said the lower target reflected broader valuation compression across software stocks rather than any deterioration in Microsoft's business fundamentals.

The bank said its channel checks remained positive, highlighting healthy adoption of Microsoft 365 Copilot and the company's positioning as enterprises increasingly optimize AI spending.

Citi expects Microsoft to deliver a strong fiscal fourth-quarter report but believes investors will focus closely on management's outlook for fiscal 2027, particularly regarding operating margins and capital expenditure.

Other brokerages also adjusted their targets.

Mizuho analyst Gregg Moskowitz lowered his price target to $490 from $515 while maintaining an Outperform rating.

"SaaS (software-as-a-service) continues to be resilient, although multiples continue to be plagued by investor concerns about AI-led disruption," Moskowitz said in a research report on software stocks.

He added that Microsoft continues to see improvement in its Azure cloud computing and Microsoft 365 Copilot businesses despite broader concerns surrounding AI-native competitors and infrastructure spending.

Wells Fargo also lowered its price target to $625 from $650 while maintaining its Overweight rating, citing questions around cloud market share and the pace of capital expenditure.

Evercore ISI moved in the opposite direction, raising its price target to $525 from $510 while maintaining an Outperform rating.

Microsoft is scheduled to report fiscal fourth-quarter results after the market closes on July 29.

Consensus estimates compiled by Fiscal AI and Koyfin call for earnings of $4.24 per share on revenue of $86.66 billion.

Analysts expect Azure growth and operating margin guidance to be the primary focus during the earnings release.

While Citi expects the fourth-quarter results to be solid, the firm believes management's commentary on fiscal 2027 could prove more important for investors as Microsoft continues expanding its AI infrastructure.

Heavy AI investments remain under scrutinyMicrosoft's aggressive capital spending remains one of the biggest concerns for investors.

The company spent $30.88 billion on capital expenditures during its fiscal third quarter, up 84.4% from a year earlier.

According to Forbes estimates, Microsoft's total fiscal 2026 capital expenditure could reach approximately $190 billion as the company continues investing in AI data centers, Azure infrastructure and computing capacity.

The elevated spending has pressured margins and free cash flow, contributing to the stock's underperformance despite continued business growth.

At the same time, analysts note that enterprise demand for AI remains healthy.

Bernstein's mid-year CIO survey pointed to strong IT budget growth in 2026, supporting Azure demand, although investors continue to monitor whether Microsoft can translate that investment into market share gains and stronger financial returns.

Microsoft appears to be prepping its sales team to get more competitive with the other major players in the AI industry.

At an internal meeting on Tuesday, the company’s executives outlined a plan for salespeople to negatively compare AI products from companies like OpenAI, Google, and Anthropic to its own, according to a new report from Bloomberg. The meeting, billed as a strategy session for the new fiscal year, reportedly leaned heavily on pitching the efficiency and cost-effectiveness of Microsoft’s in-house models against those of its rivals.

“Everyone else is selling parts — we’re selling the full end-to-end system. That’s the story that we all need to get out there and tell in FY27,” Executive Vice President Jay Parikh reportedly told the room.

Executive Vice President Jacob Andreou reportedly went further, delivering a presentation comparing Copilot directly to Anthropic’s chatbot Claude. According to Bloomberg, Andreou noted that, when it came to performance within Microsoft’s office apps, Anthropic’s model was “slower and less accurate, and lacked the proper security integrations,” Bloomberg writes.

TechCrunch has reached out to Microsoft and Anthropic for comment and will update this story if we hear from either outfit.

A company coaching its sales team on how to trash-talk competitors isn’t particularly surprising. What’s more notable is who Microsoft is now targeting — the same companies it has long depended on for the AI models powering its own products.

It’s just the latest move in that direction. A report earlier this month found that Microsoft has been swapping OpenAI and Anthropic’s models out of flagship apps like Word and Excel in favor of its own — a cost-cutting move, according to that report.

There was a time when Microsoft and OpenAI were attached at the hip. The two companies entered into a very unique agreement years ago that saw Microsoft provide capital and compute to OpenAI while allowing Microsoft to enjoy exclusive access to OpenAI’s API and models. The companies amended the partnership in April, dropping the exclusivity clause and clearing OpenAI to sell to Microsoft’s competitors.

That revised relationship may help explain the sales team’s new pitch. Microsoft has been battling a less-than-optimal stock outlook over the past year, as investors question the company’s massive spending on the buildout of its AI business. Talking up how competitive those products actually are is likely an attempt to calm those waters and build confidence in Microsoft’s long-term AI plan.

When you purchase through links in our articles, we may earn a small commission. This doesn’t affect our editorial independence.

Lucas is a senior writer at TechCrunch, where he covers artificial intelligence, consumer tech, and startups. He previously covered AI and cybersecurity at Gizmodo. You can contact Lucas by emailing [email protected].

Key Takeaways CoreWeave may offer greater AI upside, while Microsoft provides a more diversified growth profile.CRWV is expanding AI infrastructure, with backlog nearing $100 billion and revenue targets rising.Microsoft is growing AI across Azure, Copilot and cloud, but faces higher AI infrastructure spending risks. AI is increasingly gaining traction in the technology sector, creating enormous opportunities for companies that build the infrastructure powering next-generation AI models. While technology giants like Microsoft Corporation (MSFT - Free Report) have emerged as leaders in AI through strategic investments and ecosystem expansion, newer players, such as CoreWeave, Inc. (CRWV - Free Report) , are rapidly gaining attention by providing specialized cloud infrastructure purpose-built for AI workloads.

Per a report from Fortune Business Insights, the global cloud AI market size is anticipated to go from $133.4 billion in 2026 to $780.6 billion by 2034 at a CAGR of 23.8%. For investors, the question is becoming increasingly relevant: Should you invest in the AI giant with diversified earnings or the pure-play AI infrastructure company with explosive growth potential?

Here's a closer look at how CoreWeave and Microsoft compare.

The Case for MSFT StockMicrosoft benefits from a diversified revenue stream across cloud computing, productivity software, enterprise services, gaming and other areas. Its leadership in Azure and extensive AI ecosystem position the company to take advantage of the growing adoption of enterprise AI. Additionally, Microsoft's high recurring software revenue, supported by subscription-based products, generates strong free cash flow and offers a stable foundation for long-term growth.

Microsoft continues to show strong financial results, with revenue and operating income growing at double-digit rates and operating margins reaching 46%. Cloud and AI remain the main growth drivers, with cloud revenue up 29% and AI’s annual recurring revenue more than doubling, backed by strong enterprise demand. The company is investing heavily in AI infrastructure, expanding global data center capacity, launching Maia AI accelerators and Cobalt CPUs, and enhancing deployment efficiency to meet increasing demand. Microsoft also strengthens its AI platform through Azure AI Foundry, first-party AI models and a unified data layer across Fabric, Foundry and Microsoft 365.

Customer adoption continues to grow rapidly, with Microsoft 365 Copilot exceeding 20 million paid seats. GitHub Copilot and Security Copilot are gaining momentum, and enterprise use of AI agents and real-time data is increasing. Management anticipates that AI will support sustained double-digit revenue and operating income growth, driven by a shift to a hybrid subscription and usage-based pricing model. To capitalize on this opportunity, Microsoft plans substantial investments in AI infrastructure, while using hardware innovation and operational efficiencies to sustain healthy long-term margins.

Image Source: Zacks Investment Research

However, Microsoft's Azure faces intense competition from rivals with significant resources and innovation. Rising capital spending raises worries about returns and financial stability, with CapEx hitting $31.9 billion in the third quarter and expected to be over $40 billion in the fourth quarter. The combination of high capital needs, lease obligations and large AI infrastructure costs suggests Microsoft has sacrificed some financial flexibility to fund growth and shareholder payouts. This financial vulnerability provides little room to handle economic or competitive challenges, increasing risks for shareholders.

The Case for CRWV StockCoreWeave has consistently reported triple-digit revenue growth as enterprise AI adoption accelerates. Demand for NVIDIA (NVDA - Free Report) GPUs continues to exceed supply, allowing specialized providers like CoreWeave to maintain exceptionally high utilization rates. Long-term contracts with leading AI companies also provide significant revenue visibility. It became the first AI cloud provider to complete system-level validation of NVDA Vera Rubin NVL72, reaffirming its leadership in next-generation AI infrastructure. In January, NVIDIA increased its investment in CoreWeave to $2 billion.

CoreWeave continues to benefit from strong AI infrastructure demand, with its backlog nearing $100 billion, active power exceeding 1 GW and more than 3.5 GW under contract. AI workloads are mainly shifting toward inference, driving customer diversification across top AI labs, hyperscalers and enterprises, while more than 10 customers have committed over $1 billion each. The company is quickly expanding its infrastructure and platform capabilities through new data centers, self-built sites, enhanced cloud services and cross-cloud solutions.

Its partnership with NVIDIA has been strengthened through software validation, while diversified suppliers and secured component procurement support future capacity growth. CoreWeave has also bolstered its financial position by raising significant debt and equity capital, reducing its cost of debt and reaffirming its revenue outlook. Management expects revenue to surpass $18 billion in 2026 and $30 billion in 2027, driven by strong demand, growing AI inference workloads and a long-term goal of more than 8 gigawatts of active power by 2030.

Image Source: Zacks Investment Research

Nonetheless, CoreWeave faces several risks, including its heavy reliance on continued AI infrastructure spending and substantial capital expenditure requirements to support rapid expansion. The company also has significant customer concentration, making it dependent on a relatively small number of large clients. In addition, CRWV’s stock is likely to remain highly volatile given its high-growth profile; while intensifying competition from hyperscalers and other cloud providers could pressure its growth and margins over time.

CRWV & MSFT’s Share PerformanceYear to date, CRWV has surged 11.7% while MSFT is down 20.4%.

Image Source: Zacks Investment Research

Valuation ConsiderationsCoreWeave commands a premium valuation because investors expect years of extraordinary expansion. Microsoft trades at a premium relative to the broader market but remains supported by durable earnings, robust cash flow and a diversified business model.

In terms of Price/Book, CRWV shares are trading at 7.52X, marginally above MSFT’s 6.9X.

Image Source: Zacks Investment Research

How Do Zacks Estimates Compare for CRWV & MSFT?The Zacks Consensus Estimate for CoreWeave’s earnings for 2026 has been trimmed down 0.6% over the past 60 days.

Image Source: Zacks Investment Research

For MSFT, there has been zero revision.

Image Source: Zacks Investment Research

CRWV or MSFT: Which Stock Offers More Upside?Both companies are well-positioned to benefit from the AI boom, but they target different types of investors.

If AI infrastructure demand continues to grow at today's rate, CoreWeave has significantly more room for expansion than Microsoft. The company operates with a much smaller revenue base, meaning each new customer and data center can boost growth. Microsoft offers a more balanced investment profile. Its AI initiatives are strengthening almost every existing business, while Azure continues to capture enterprise cloud demand. Even if AI spending slows down, Microsoft's software, cloud, productivity and security businesses provide steady earnings growth. For investors looking for maximum exposure to AI infrastructure growth, CoreWeave might offer greater upside potential over the next few years.

CRWV at present carries a Zacks Rank #2 (Buy) while MSFT has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, CRWV seems to be a better pick at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Takeaways MSFT moved several Premium event features into Teams Enterprise and introduced new event licensing options.MSFT reported 17% Productivity and Business Processes revenue growth, led by Microsoft 365 Commercial.Microsoft's Teams pricing differs from Zoom and Salesforce by expanding base-tier features over paid tiers. Microsoft (MSFT - Free Report) is reshaping how it charges for Teams, and the shift carries real implications for the stock. Effective April 1, 2026, the company moved a broad set of previously Premium-only features, including town hall and webinar tools, streaming chat, real-time event insights and immersive 3D events, into the base Teams Enterprise license, while narrowing Teams Premium to a smaller set of security, branding and AI-driven capabilities still priced at $10 per user per month. To offset lost Premium revenues from smaller events, Microsoft introduced Attendee Capacity Pack licenses, letting organizations scale events up to 100,000 participants without full per-seat licensing, alongside a new Teams Shared Space license tied to physical desks rather than users. Teams Live Events will be fully retired by June 30, 2026, pushing remaining customers toward the new unified events framework.

These product changes sit against a backdrop of solid underlying performance. In the third quarter of fiscal 2026, ended March 31, Microsoft's Productivity and Business Processes segment, which houses Teams and Microsoft 365 Commercial, grew revenues by $5.1 billion, or 17%, with Microsoft 365 Commercial cloud revenues up 19% on higher revenue per user driven by E5 and Copilot adoption. Total company revenues reached $82.9 billion, up 18%. For the fourth quarter, Microsoft guided to Commercial cloud growth of 15% to 16% in constant currency on an adjusted basis, with sequential increases in net paid seat adds expected to lift ARPU further.

The bet is that broader feature access drives seat expansion and stickiness even as some Premium seats get trimmed at renewal, a trade-off management has not fully quantified. The coming renewal cycles, combined with reported net paid seat adds and ARPU trends in subsequent quarters, will offer the clearest read on how the restructured Teams pricing model is translating into actual monetization for Microsoft's Productivity and Business Processes segment.

How Zoom and Salesforce Approach Collaboration MonetizationMicrosoft's Teams repackaging invites comparison with how Zoom Communications (ZM - Free Report) and Salesforce (CRM - Free Report) monetize collaboration tools. Zoom continues to lean on tiered per-seat plans alongside add-ons like Zoom Phone and AI Companion, rather than folding premium features into lower tiers the way Microsoft has done with Teams Enterprise. Salesforce, through Slack, similarly maintains distinct paid tiers rather than broadly redistributing premium capabilities. Compared with Zoom and Salesforce, Microsoft's move to widen base-tier access while narrowing Premium reflects a different monetization philosophy, one that Zoom and Salesforce have so far not mirrored in their own collaboration product lines.

MSFT’s Share Price Performance, Valuation & EstimatesMSFT shares have lost 15.3% in the past six-month period compared with the Zacks Computer – Software industry’s decline of 19.8%. The Zacks Computer and Technology sector has appreciated 14.1% in the same time frame.

MSFT’s 6-Month Price Performance
Image Source: Zacks Investment Research

From a valuation standpoint, MSFT stock appears overvalued, trading at a forward 12-month price/earnings ratio of 19.82X, higher than the industry’s 18.95X. MSFT has a Value Score of C.

MSFT’s Valuation
Image Source: Zacks Investment Research

The Zacks Consensus Estimate for MSFT’s fiscal 2026 earnings is pegged at $17.33 per share. The estimate indicates 27.05% year-over-year growth.

Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In Brief

Posted:

9:20 AM PDT · July 15, 2026

Image Credits:Microsoft / PhotoMosh (edited) Microsoft released a record number of security patches for Windows, Office, and other tech product lines this week, citing the use of AI to aid the discovery of code vulnerabilities.

The technology and cloud giant issued patches for 570 security flaws on Tuesday as part of its monthly scheduled release of fixes, which security researchers have long dubbed “Patch Tuesday.”

At least two of the vulnerabilities are classified as zero-days, meaning that they were exploited before Microsoft was made aware of them. One bug affecting Windows Server allows hackers to escalate their privileges from a limited user to a system administrator. Another bug affects the SharePoint file sharing server — the U.S. government’s cybersecurity agency CISA has warned hackers were actively exploiting the bug to compromise organizations.

Krebs on Security first reported the news.

The huge patch update comes a week after Microsoft said in a blog post that it expected its usual batch of monthly security patches to be far higher in number than before. The company cited its use of AI to help its employees uncover previously undiscovered security bugs in its software.

“As AI helps defenders discover more issues, customers will see a higher volume of security updates included in each security release,” said Windows boss Pavan Davuluri.

As AI models become more advanced and focused on cybersecurity issues, security researchers are using them to uncover vulnerabilities that may have been dormant in software code for years, if not longer. Parts of Microsoft’s Windows code dates back decades.

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NEW YORK, July 14, 2026 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against Microsoft Corporation (“Microsoft” or the “Company”) (NASDAQ: MSFT). Such investors are advised to contact Danielle Peyton at [email protected] or 646-581-9980, (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased. 

The class action concerns whether Microsoft and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. 

You have until August 11, 2026, to ask the Court to appoint you as Lead Plaintiff for the class if you purchased or otherwise acquired Microsoft securities during the Class Period. A copy of the Complaint can be obtained at www.pomerantzlaw.com.   

[Click here for information about joining the class action]

On January 28, 2026, Microsoft announced disappointing results for its fiscal second quarter ended December 31, 2025.  First, during the quarter Microsoft’s Azure growth had slowed suddenly and fallen below analyst expectations.  During the related earnings call, CFO Amy E. Hood revealed that the slower Azure growth was primarily due to computational capacity constraints, as Microsoft had diverted CPU and GPU capacity to Copilot applications and AI-related R&D.  Second, Microsoft revealed that its capital expenditures had increased to $37.5 billion during the quarter, causing Microsoft’s capital expenditures for the first six months of its fiscal 2026 to increase to $72.4 billion compared to $88.2 billion for all of Microsoft’s fiscal 2025.  Third, Microsoft revealed, for the first time, that the number of paid Microsoft 365 Copilot seats totaled only 15 million to date, materially below analyst estimates and a fraction of the more than 450 million commercial Microsoft 365 users. 

On this news, the price of Microsoft stock fell nearly 10%.

Then, on February 3, 2026, The Wall Street Journal revealed, in an article titled “Microsoft’s Pivotal AI Product Is Running Into Big Problems,” that severe challenges and functionality issues had plagued Microsoft’s Copilot offerings, leading to Copilot losing market share during the Class Period to competing products such as Google’s Gemini.  The price of Microsoft stock continued to fall in the days after Microsoft’s second quarter 2026 earnings announcement as the market continued to digest the adverse news and sources such as The Wall Street Journal revealed new adverse information.

Thereafter, on March 17, 2026, The Wall Street Journal revealed in an article titled “Microsoft Seeks More Coherence in AI Efforts With Copilot Reorganization” that Microsoft was reorganizing its Copilot product teams to unify commercial and consumer versions partly in response to the challenges revealed by The Wall Street Journal’s prior reporting on Copilot’s problem-plagued development and disappointing customer adoption. 

On this news, the price of Microsoft stock continued to fall.

Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com. 

Attorney advertising. Prior results do not guarantee similar outcomes.  

CONTACT: 
Danielle Peyton 
Pomerantz LLP 
[email protected] 
646-581-9980 ext. 7980 

© Summit Art Creations / Shutterstock.com

Gil Luria, Head of Technology Research at D.A. Davidson, frames the debate over AI capital spending as a timing problem. Microsoft, Amazon, and Alphabet say their data center investments are already generating attractive returns because much of the capacity is sold before construction is complete. Investors are still waiting for those returns to become visible in reported cash flow.

“There’s a disconnect between what the companies are saying about return on investment from this AI spend and what investors feel,” Luria explained during a July 10 CNBC interview. “What investors see is diminishing cash flows, the lowest levels of cash flow margin they’ve seen in a long time.”

Luria believes both sides can be right. Hyperscalers are spending enormous sums upfront to meet contracted demand from customers such as OpenAI and Anthropic, while the revenue and cash flow from those investments will arrive over several years. The key question is whether cloud growth can accelerate quickly enough to justify the historic spending underway today.

OpenAI and Anthropic’s Cumulative Run Rate Climbed From Under $20B to Over $75B in 6 Months The clearest evidence that this spending cycle is anchored in real consumption sits on the customer side. “OpenAI and Anthropic combined had less than $20 billion run rate just six months ago. Now they have more than $75 billion run rate. That’s a huge curve,” Luria said.

That is the readthrough Luria wants investors to focus on. “For Microsoft, Amazon and Google… what those three companies are saying is these investments are already coming at good returns. You just don’t see that yet. When we build a data center, it’s already pre-sold. We know what it’s going to cost to build and operate. We’re marking that up substantially to our customers, and therefore there’s a good return.”

Microsoft Nearly Doubled Capex Without Sacrificing Its Margins Microsoft’s (NASDAQ:MSFT | MSFT Price Prediction) Q3 FY26 capex totaled $30.88 billion, up 84.39% year-over-year, while operating margin held at 46.3% and the AI business reached a $37 billion annual run rate, up 123% year-over-year. Commercial remaining performance obligations reached $627 billion, an enormous pre-sold backlog.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

Luria pointed to the offset that keeps margins steady: “We saw Microsoft do layoffs at Xbox to make sure that they can show that their revenue acceleration is happening with stable margins. That’s a sign of good returns.” He also expects Azure growth to accelerate from 40% in upcoming guidance. Microsoft shares are down 20.17% year-to-date through July 9, 2026, trading at $384.36.

Amazon Is Spending $200 Billion to Meet Explosive AI Demand Amazon (NASDAQ:AMZN) posted AWS revenue of $37.587 billion in Q1 2026, up 28%, the fastest growth in 15 quarters, at a 37.7% operating margin. The custom chips line topped a $20 billion revenue run rate, growing triple digits year-over-year. Anthropic committed to up to 5 GW of Trainium capacity and OpenAI to roughly 2 GW starting in 2027. Q1 capex climbed to $44.203 billion, and full-year 2026 capex is guided at roughly $200 billion.

Google Cloud Grew 63% as Free Cash Flow Fell 47% Alphabet (NASDAQ:GOOGL) posted the most dramatic acceleration. Google Cloud revenue grew 63% to $20.03 billion, with backlog nearly doubling quarter-on-quarter to over $460 billion. Capex more than doubled to $35.67 billion, and 2026 capex is guided at $175-$185 billion. Free cash flow fell to $10.12 billion, down 46.63% year-over-year. That is exactly the cash flow compression Luria described. Alphabet shares are up 14.81% year-to-date.

What to Watch Next Luria’s thesis rests on a multi-year gap between when hyperscalers spend money and when investors see the returns. Data centers require enormous upfront capital, while the revenue and cash flow they generate will likely arrive over years one through five. In the meantime, Microsoft, Amazon, and Alphabet are protecting margins by cutting costs elsewhere and pointing to pre-sold capacity, accelerating cloud growth, and enormous backlogs as evidence that the demand is real.

The near-term test will be whether Azure accelerates from 40% growth and whether AWS and Google Cloud sustain their recent momentum. Microsoft’s $627 billion commercial backlog, Amazon’s capacity commitments from Anthropic and OpenAI, and Alphabet’s cloud backlog above $460 billion all support the hyperscalers’ argument.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

Contact [email protected] for any questions or corrections.

, /PRNewswire/ -- Pomerantz LLP announces that a class action lawsuit has been filed against Microsoft Corporation ("Microsoft" or the "Company") (NASDAQ: MSFT). Such investors are advised to contact Danielle Peyton at [email protected] or 646-581-9980, (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased. 

The class action concerns whether Microsoft and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. 

You have until August 11, 2026, to ask the Court to appoint you as Lead Plaintiff for the class if you purchased or otherwise acquired Microsoft securities during the Class Period. A copy of the Complaint can be obtained at www.pomerantzlaw.com.

[Click here for information about joining the class action]

On January 28, 2026, Microsoft announced disappointing results for its fiscal second quarter ended December 31, 2025. First, during the quarter Microsoft's Azure growth had slowed suddenly and fallen below analyst expectations. During the related earnings call, CFO Amy E. Hood revealed that the slower Azure growth was primarily due to computational capacity constraints, as Microsoft had diverted CPU and GPU capacity to Copilot applications and AI-related R&D. Second, Microsoft revealed that its capital expenditures had increased to $37.5 billion during the quarter, causing Microsoft's capital expenditures for the first six months of its fiscal 2026 to increase to $72.4 billion compared to $88.2 billion for all of Microsoft's fiscal 2025. Third, Microsoft revealed, for the first time, that the number of paid Microsoft 365 Copilot seats totaled only 15 million to date, materially below analyst estimates and a fraction of the more than 450 million commercial Microsoft 365 users. 

On this news, the price of Microsoft stock fell nearly 10%.

Then, on February 3, 2026, The Wall Street Journal revealed, in an article titled "Microsoft's Pivotal AI Product Is Running Into Big Problems," that severe challenges and functionality issues had plagued Microsoft's Copilot offerings, leading to Copilot losing market share during the Class Period to competing products such as Google's Gemini. The price of Microsoft stock continued to fall in the days after Microsoft's second quarter 2026 earnings announcement as the market continued to digest the adverse news and sources such as The Wall Street Journal revealed new adverse information.

Thereafter, on March 17, 2026, The Wall Street Journal revealed in an article titled "Microsoft Seeks More Coherence in AI Efforts With Copilot Reorganization" that Microsoft was reorganizing its Copilot product teams to unify commercial and consumer versions partly in response to the challenges revealed by The Wall Street Journal's prior reporting on Copilot's problem-plagued development and disappointing customer adoption. 

On this news, the price of Microsoft stock continued to fall.

Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com. 

Attorney advertising. Prior results do not guarantee similar outcomes.  

CONTACT:
Danielle Peyton
Pomerantz LLP
[email protected]
646-581-9980 ext. 7980 

SOURCE Pomerantz LLP

by Lisa Stiffler on Jul 9, 2026 at 9:00 amJuly 9, 2026 at 8:30 am

Inside a Microsoft data center. (Microsoft Photo) Microsoft has just four more years to reach its ambitious goal of removing more planet-warming carbon that it produces. But the company’s annual sustainability report, released Thursday, shows it’s moving in the opposite direction, as its 2025 emissions spiked 25% over the previous year.

Despite the troubling increase, Microsoft leaders say they remain committed to the longer-term goal.

“We continue to really be focused around carbon negativity by 2030,” said Melanie Nakagawa, chief sustainability officer, in an interview with GeekWire.

The Redmond, Wash.-based company is the latest tech giant to fall further behind its climate targets as they invest billions of dollars in new, energy-hungry data centers to power the AI boom. Amazon’s carbon footprint jumped 16% last year, while Google’s greenhouse gas emissions swelled 18%.

The report also shows how much energy use drove that increase: Microsoft’s emissions from purchased electricity — known as Scope 2 emissions — grew by 25% last year.

In total, Microsoft produced 34 million metric tons of carbon dioxide equivalent in 2025. After subtracting the carbon it paid to remove from the atmosphere, that figure drops to a net 20 million tons. That puts the company’s footprint roughly on par with the total emissions of Panama or Lithuania.

In addition to data center expansion, Nakagawa said, the carbon increase was also driven by Microsoft’s decision to stop buying unbundled, short-term renewable energy certificates, or RECs — a mechanism companies can use to quickly lower their reported emissions for a given year. Microsoft is instead prioritizing longer-term initiatives with bigger impact, she said.

The challenge Microsoft wants to answer, she said, is how to take a “portfolio approach” that spans carbon dioxide removal, carbon-free electricity, sustainable materials, and fuels — addressing all of them together rather than in isolation.

Image from Microsoft’s 2026 sustainability report. Where Microsoft made gains The annual report highlighted areas of success. That includes:

Matching its electricity consumption worldwide with clean energy sources. For the first time, replenishing more fresh water globally than it withdrew, making important progress on its 2030 goal of being water positive across operations. Achieving 92% reuse and recycling of decommissioned cloud servers and components for the second consecutive year. Reaching a total of 40 gigawatts of clean power purchase agreements across 26 countries, with 19 gigawatts currently online. (Forty gigawatts is roughly enough power to serve 30-40 million typical U.S. homes at once.) Scrutiny over recent moves Microsoft’s sustainability disclosures come after a series of announcements and news reports that have raised concerns among climate advocates.

Last month, Microsoft and Chevron announced an agreement to build a natural gas facility in Texas with a 2.67 gigawatt capacity, providing dedicated electricity to the tech company for 20 years. In May, Bloomberg reported that Microsoft was considering scaling down or scuttling a pledge to match its electricity use with carbon-free power around the clock by 2030. In April, the New York Times reported that Microsoft was pausing future purchases of carbon removal credits, after years as the market’s top buyer. Nakagawa said the company has not canceled any canceled removal projects, though she did not provide specifics about new purchases going forward. “We’re just continuing to take a hard look at each of the deals that are coming through,” she said, and looking for “credible opportunities to scale.”

Asked about Microsoft’s commitment to purchasing clean energy 24/7 — an approach that would eliminate reliance on coal- or gas-powered energy when wind and solar aren’t available — Nakagawa declined to confirm it. “We still are looking towards opportunities around carbon-free electricity,” while focusing on the 2030 carbon negative goals, she said.

As to the natural gas deal, the chief sustainability officer said Microsoft has also contracted to purchase 4.7 gigawatts of renewable power in Texas alone and that the company evaluates its energy investments as part of a broader mix.

Looking for efficiencies elsewhere Even as data centers remain the prime driver of Microsoft’s rising energy use and emissions, the company points to other steps aimed at reducing the environmental footprint of the facilities.

That includes increasing the use of lower-carbon steel and concrete and incorporating mass timber into data center buildings. And In the past year, Microsoft has added a seventh Circular Center — one of several facilities worldwide where the company recycles and reuses electronics from data center operations.

Microsoft is also working with developers to use AI models more efficiently and build right-sized products. AI agents can review, test and improve code so it uses less energy when it runs, Nakagawa said.

“I definitely think there’s an opportunity here,” she said.

The Microsoft logo is displayed on a smartphone screen placed on a reflective surface onto which the Department of War emblem is projected, in Creteil, France, on May 4, 2026. The Pentagon has signed agreements to integrate AI into its classified networks. (Photo by Samuel Boivin/NurPhoto via Getty Images)

NurPhoto via Getty Images

This article was written by Doug Nathman, with research by his team at Trefis.

What may seem like just another AI product reflects a fundamental and possibly profitable transformation in the company's revenue model.

Despite being a key player in the AI arena, Microsoft (MSFT) shares have remained surprisingly grounded. Over the last year, the stock has dropped approximately 20% and is trading 28% below its peak from the past 52 weeks. With so much emphasis on innovative features, you might be curious about what could genuinely drive a sustainable rise from this point.

The solution lies in a subtle yet significant change in the company’s overall business strategy, which has the potential to unveil a new layer of growth atop its considerable existing customer base.

The New Catalyst: A "Per User and Usage" ApproachFor many years, Microsoft primarily sold software. Now, it is transitioning to a model that sells results instead. The company’s leadership characterizes this transformation as shifting towards a "per user and usage business." Consider the implications of that. Selling a subscription for access to a tool is one thing; receiving compensation for every task that tool performs is entirely different. The objective goes beyond merely adding more users to capturing a portion of the value generated from the countless queries, reports, and summaries executed by its AI agents. If this model succeeds, it could drastically alter the valuation of each of Microsoft’s hundreds of millions of users.

Are There Actually Consumers Paying For This?A robust strategy is one aspect, but execution is another matter altogether. Initial indications for this new model can be seen from its AI initiative: Microsoft 365 Copilot. The company has now achieved "over 20 million paid seats for Microsoft 365 Copilot," with numbers rapidly increasing. In the latest quarter, seat additions surged by 250% year-over-year, marking the fastest growth since the product was introduced. This is not a hypothetical scenario; it represents a genuine and growing customer base that is swiftly adopting the consumption-based solutions that signify the company’s future. We have also examined how this could affect the stock's valuation. For those preferring to invest in the entire technology sector rather than betting on one large corporation, a tech ETF like VGT includes Microsoft among its top holdings.

MORE FOR YOU

The Investment Amount Is $190 BillionMicrosoft is reinforcing this strategic pivot with a massive influx of capital. The company anticipates spending around $190 billion on capital expenditures in the calendar year 2026 alone. This substantial amount is earmarked for constructing the global infrastructure necessary to support all that new, paid usage, exceeding merely the establishment of additional data centers. The company has been transparent that even with this expenditure, robust customer demand continues to surpass available capacity. This exemplifies a classic growth narrative: invest significantly to satisfy overwhelming demand that can be directly monetized. This spending is the clearest indication of management’s confidence in the future of a per-user, per-usage model.

Microsoft is not merely undergoing another product cycle; it’s attempting to fundamentally rewire its entire business relationship with its customers. The premise is that by integrating AI agents into the everyday routines of nearly every office worker worldwide, it can generate a new, sustainable, and lucrative revenue stream that compounds over the years. The necessary components are in place, the investment is secure, and the initial wave of customers is already committing to spend.

Where Will An Opportunity Like This Appear First?An opportunity of this nature only becomes significant once it is reflected in the figures, with the first clear indication appearing in management’s forecasts. When a company can genuinely perceive the new revenue materializing, it adjusts its projections upwards, and an increased forecast rewarded by the market serves as one of the clearest validations that a scenario like this is becoming reality. Federal Realty Investment Trust (FRT), Fortinet (FTNT), and GE Vernova (GEV) are currently exhibiting precisely that signal.

What’s A Good Way To Support A Narrative Like This?A credible growth narrative warrants action, but engaging through one stock entails accepting every setback that may be faced by that single company. The more strategic approach is to maintain a diverse selection of stocks where the long-term prospects are equally strong, ensuring that the enduring upside remains intact and that no single surprise can derail it. This is the method by which patient capital grows.

The Trefis High Quality (HQ) Portfolio evaluates the entire landscape of quality across thousands of stocks, rather than focusing on a single driver, holding the 30 strongest cases, and regularly rebalancing them with discipline. It has a proven history of outperforming a benchmark combining the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.

All year, Michael Burry has been shorting AI. He bought put options against Nvidia. He shorted Palantir. He posted on Substack in May comparing the current market to the last months of 1999. If you followed his moves in 2026, you were building a pretty clear picture of where he stood.

On June 25, he blew that picture up. Burry’s firm Scion Asset Management disclosed it had bought December 2028 LEAP call options on Microsoft with a strike price in the low $700s. Microsoft was trading around $356 at the time. He is betting it will nearly double before the end of 2028.

What Michael Burry’s Microsoft LEAP options bet actually meansGetting to $700 is not enough on its own. The options only become profitable once Microsoft clears the strike price plus whatever premium Burry paid for the contracts. Fall short of that by December 2028 and the entire premium is gone.

Burry explained his thinking in the Substack post. He wrote that “$350 level for Microsoft is a good place to buy” and described the longer-dated options as cheap relative to his outlook. LEAPs let him express that conviction without committing the capital a straight stock purchase would require.

How much capital he actually committed is unknown. Scion Asset Management chose to deregister from the SEC on November 10, 2025, wound down its outside investor capital, and moved to a family office structure. The June 25 Substack post had no contract counts or dollar figures. Nobody outside Scion knows whether this is a small speculative position or a major allocation.

Why Microsoft stock fell 32% even as its AI revenue hit $37 billionMicrosoft stock dropped roughly 32% from its July 2025 peak of $550.83 going into Burry’s disclosure. Azure cloud revenue grew 40% in its most recent quarter. Annualized AI revenue crossed $37 billion, up 123% year over year. More than 80% of Fortune 500 companies run workloads on Azure. None of that stopped the stock from falling.

The culprit was the spending plan. Microsoft committed to $190 billion in capital expenditures for 2026, nearly all of it going into AI infrastructure. Shares fell over 3% in after-hours trading on that news even though earnings came in above expectations. Investors are not disputing the revenue. They are worried about how many years of heavy spending come before the returns show up.

Burry pushed back on that read in his Substack. He called 2026’s software selloff a product of “reflexive market dynamics,” a feedback loop between declining stock prices and stress in the bank debt market, not a sign of businesses deteriorating. He used the same logic to justify his long positions in Adobe and PayPal, both of which also sold off hard this year.

The Microsoft AI business Burry is betting will reach $700 by 2028Azure hosts OpenAI’s models and serves as the cloud backbone for a growing share of enterprise AI workloads. GitHub Copilot runs inside the daily workflows of millions of developers. Microsoft 365 Copilot, which costs $30 per user per month on top of existing enterprise licenses, has crossed 20 million commercial seats.

The contracted revenue sitting behind all of that came in at $627 billion in the most recent quarter, up 99% year over year including OpenAI. About 25% of that gets recognized over the next 12 months, up 39% from a year ago.

What retail investors should know before copying Michael Burry’s LEAP tradePeople copy Burry. They did it with the housing short. They did it with GameStop. Some made money. Many got the timing wrong and did not. LEAPs add another layer of risk that stock trades do not carry.

If Microsoft closes at $650 in December 2028, a shareholder is up roughly 80%. Burry’s options expire worthless. A strong, multi-year rally that stops short of $700 plus premium still wipes out the position. There is no partial credit.

Buying Microsoft shares directly gets you exposure to the same thesis Burry laid out, with no expiration date working against you. At around $360, the stock trades at roughly 28 times forward earnings, below where it was before the 2026 selloff. If the business keeps compounding the way the last few quarters suggest, shareholders capture that without needing a near-doubling by a specific date.

Burry said as much himself. He described $350 as a good entry for common stock buyers and framed the LEAPs as the vehicle that made sense for his own outlook and structure. That is a meaningful distinction. Retail investors who buy the options because Burry did, without matching his conviction or his ability to absorb a total loss on the premium, are taking on a very different bet than the one he made.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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Microsoft CEO Satya Nadella George Chan/Getty Images Microsoft announced plans to lay off around 4,800 employees, or 2.1% of its global workforce, on Monday, confirming Business Insider's earlier report.

The cuts mostly impact the sales and Xbox gaming organizations, Microsoft HR chief Amy Coleman wrote in an email to employees. Microsoft's Xbox division also plans to cut 20% of its workforce this fiscal year. Xbox will account for 1,600 of Monday's cuts.

Microsoft is cutting costs as it spends heavily in AI infrastructure, while facing growing investor concerns that AI could upend traditional software. Those worries helped send Microsoft's stock down 19% in June, its worst monthly performance since the dot-com era.

Microsoft typically cuts jobs around the start of its new fiscal year on July 1. Last year, the company eliminated 6,000 roles in May and an additional 9,000 employees, or about 4% of the company's workforce, in July.

Microsoft had more than 220,000 employees prior to the cuts.

As part of cost-cutting, Microsoft also earlier this year launched a voluntary retirement program offering buyouts to some employees.

About one-third of nearly 9,000 eligible employees took the buyout, in line with expectations, according to a person familiar with the program. That allowed Microsoft to cut a lower percentage of its workforce compared to last year, this person added.

Microsoft's latest layoffs reflect a broader balancing act playing out across Big Tech. Even as tech companies pour record amounts of money into AI infrastructure, they are looking for ways to offset those costs by trimming their workforce and operating more efficiently. In May, Meta laid off around 8,000 employees, accounting for about 10% of the company's total workforce. Amazon, Coinbase, Google, and Block have also laid off employees in recent months.

Read the memo Coleman sent to employees:

"When I stepped into this role, I promised to communicate more openly with you and share the "why" behind our decisions.

Today we are eliminating around 4,800 roles, about 2.1% of our global workforce, as we focus our people, investments, and energy on the priorities that will keep Microsoft positioned to deliver for customers in a fast-changing industry. The people whose jobs are impacted today are our colleagues and friends. They have made meaningful contributions to Microsoft, and we are deeply grateful for everything they have done.

Decisions like these are never easy, and you have my commitment that we are constantly looking for ways to reduce the need for job eliminations. Whenever possible, our priority is to place people into new roles aligned to the company's highest priorities and greatest areas of opportunity. Over the past year, we have redeployed more than 4,000 employees into new roles, including another 500 this month. We will also transition four of our gaming studios to operate independently under new management, with the goal of preserving both their intellectual property and ongoing projects. In addition, more than 30% of eligible employees chose to participate in our recent voluntary retirement program, and we will continue exploring similar approaches in the future. While this doesn't change the difficulty of today's news, we will continue to do everything we can to create opportunities for our people, reduce the need for job eliminations where possible, and responsibly support those affected with care and respect.

The "why" is this: our business is changing because the world around it is changing. The way technology is built, deployed, and used is transforming faster than at any point in my time here. Our customers' needs are shifting, the business models that serve them are shifting, and that means the work itself — what we do, where we focus, and how we're organized — has to transform too. Companies don't get to choose whether their industry changes; they only get to choose whether they change with it. That means we will need to adjust resources and roles and shift how we operate so we can have the greatest impact for our customers.

I also want to be direct that the roles eliminated today are not being replaced by AI. At the same time, what is true is that AI is changing how work gets done. Some of the tasks we do every day can now be automated, and that means we all need to keep learning, keep building new skills, and keep adapting as the work evolves. Our customers are navigating this same shift, and they're counting on us to help them through it. We can't do that well unless we're doing it ourselves. This comes down to two commitments: making the decisions needed to drive differentiated customer value, and supporting the people affected by them.

First, we will make the hard changes required to build differentiated products and services that deliver differentiated customer value. We are aligning our investment, people, and energy to our business priorities. Today's changes mostly impact our Commercial and XBOX organizations. In our Microsoft Commercial Business, they build on last week's Frontier Company announcement, reshaping how we work and embedding our engineering experts alongside customers so we can help them accelerate their technology deployments. In XBOX, we are restructuring to position the business for long-term success. Engineering teams across the company will also continue to evolve their structure and priorities to meet customer needs and innovate for the future.

Second, we will do this thoughtfully. As mentioned above, we are working on alternative solutions to job eliminations and beyond this, we will continue to invest in equipping employees with new skills, including in AI. For those who are impacted, we provide financial support and resources to help them take their next step.

I know many of you want to help those who are leaving but aren't sure how. Reach out and check in on your colleagues. Use your network to bring people together, share what makes them exceptional, and help create connections to opportunities that might not happen otherwise.

We are still early on this journey, and there will be more changes ahead; other parts of our business will need to make similar changes. Each time, you can hold us to the two commitments.

During my time at Microsoft, I've seen this company reinvent itself again and again. What makes that possible has always been our people — their resilience, creativity, and willingness to keep learning.

Thank you for everything you bring to Microsoft.

Amy"

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