It’s hard to imagine Microsoft filing a better financial report.
The tech giant not only recorded significant growth in its AI-powered Azure cloud computing business, but also refrained from raising its capital investment spending forecast.
Investors were outraged by the report, sending Microsoft shares up as much as 16%. The stock is currently on track for its biggest single-day increase since 2008.
Microsoft’s market success has done well to paint a blueprint for hyperscalers hoping to get investors excited again. That means demonstrating that you’re starting to monetize AI and not adjusting your spending forecasts upward. If you do, investors will reward you.
It also reinvigorated markets, which had fallen sharply following Fed Chairman Kevin Warsh’s post-FOMC speech on Wednesday. Here is a summary of the overall market profits:
- S&P500: 7,379.32, 0.9% increase
- Dow Jones Industrial Average: 51,723.72, 0.3% increase
- Nasdaq 100: 27,905.26, 2.6% increase
The chip manufacturing sector, which has been the biggest lightning rod for AI spending worries, received a particularly big boost. The Philadelphia Semiconductor Index soared 8%, with Micron, Intel, and AMD each gaining double digits.
Market mover Microsoft’s earnings report was in sharp contrast to that of fellow hyperscaler Meta.
At the same time as Meta announced disappointing sales forecasts, it also raised its capital spending forecast and told investors the lower end of its 2026 capital spending forecast. The company’s stock price fell 8%.
Meta-specific concerns aside, Microsoft may have just shown the market that hyperscalers can walk a fine line in their spending strategy, one that allows them to both remain competitive and project at least some image of capital discipline.
Jeff Fratarcangeli, managing principal at Fratarcangeli Wealth Management, told Business Insider earlier this week that this is a line he expects to see more companies walk in the future. He doesn’t think it’s wise for companies to scale back capital spending, but said companies can acknowledge investors’ concerns.
“I want to see them play on both sides of that,” Fratarcangeli said.
He added: “They can say things that don’t necessarily excite investors, but still claim to remain competitive.”