Investors await Q4 results to gauge returns on Microsoft’s $35.2 billion capex amid AI demand constraints and free cash flow concerns.
Microsoft (MSFT) reports fourth-quarter earnings after the bell Wednesday, with investors focused on whether its AI investments are delivering revenue growth. Shares have fallen over 18% year-to-date, underperforming rivals Amazon (AMZN) and Google (GOOG, GOOGL), as concerns mount over aggressive capital expenditure and its impact on free cash flow.
Analysts expect Microsoft to spend $35.2 billion on capex excluding capital leases, a 106% year-over-year increase. The company faces capacity constraints in meeting AI service demand, but further spending hikes could unsettle investors. Alphabet’s recent capex guidance revision to $195 billion-$205 billion sent its stock down 6%.
Azure cloud growth of 39% is seen as a key metric for Microsoft to justify its spending. The results will test market confidence in Big Tech’s AI-driven capital allocation strategies.