Investors penalize MSFT for $38B Q1 capex jump, cutting free cash flow by 10% and squeezing shareholder returns.
Microsoft shares closed at a one-year low Thursday, marking their steepest June decline in history with a 21.6% drop month-to-date. The sell-off reflects investor frustration over a 63% surge in capital expenditures to $38 billion last quarter, which trimmed free cash flow by 10%.
Analysts project 2026 capex could reach $190 billion, reducing capital available for buybacks and dividends. Only 18 S&P 500 companies have underperformed MSFT this month, underscoring the market’s impatience with AI infrastructure costs that have yet to yield visible growth.
The stock’s 24% year-to-date decline contrasts sharply with its long-term outperformance, raising concerns about the sustainability of aggressive AI investments amid slowing cash flow growth.