Microsoft

Microsoft sells software and cloud computing services to businesses and consumers. Its Azure platform rents computing power, storage, and AI tools to companies that need to run applications or train AI models. Its Microsoft 365 suite sells productivity software like Word and Excel, and Copilot adds an AI assistant on top of that suite. Microsoft also owns Windows, LinkedIn, GitHub, and Xbox, and it holds a large stake in OpenAI.

The market discounts Microsoft mainly because of its record AI data center spending. Capital spending, including finance leases, was $41 billion in the June 2026 quarter, and Microsoft guided more than $50 billion for the September 2026 quarter. Investors fear that this spending will hold down free cash flow for years before it pays back. For the gap to close, Azure revenue growth must keep pace with the new data center capacity.

That would show that the spending buys revenue and not only cost. Azure growth was 43% in the June 2026 quarter, For the September 2026 quarter, management guided Azure growth of 44% to 45% in constant currency, under a new and narrower Azure definition. Management says that Azure capacity is still smaller than demand. Microsoft also depends less on one AI partner.

OpenAI contracted to buy an additional $250 billion of Azure services, and Copilot now offers Anthropic's Claude models together with OpenAI's models. In September 2026, Microsoft added new coding and agent tools to Copilot, and Azure customers started to use OpenAI's new GPT-6 Astra model. These are signs that AI products bring paid use and not only cost. Microsoft will report fiscal Q1 2027 results on October 28, 2026.

That report will show whether Azure growth and margins hold as spending increases. If Azure keeps growing near its current pace through mid-2027, the gap can close over the next two to four quarters.

1. Oct 28, 2026Pending

   Fiscal Q1 2027 results: Azure growth versus capexAzure growth near the guided 44% to 45% in constant currency, under the new Azure definition, with stable cloud margins passes; a clear Azure slowdown while capex keeps rising fails.
2. Jan 2027 · est.Pending

   Fiscal Q2 2027 results: Copilot uptake and Azure capacityAzure growth that holds near its current pace and rising paid Copilot use pass; slower Azure growth with no sign of new capacity filling fails.

Every passed and failed checkpoint across all picks

Microsoft has the highest credit ratings, and its bond debt is small. It pays for much of its data center build-out through leases, not bonds, and these leases fix a large part of future costs, even if AI demand does not hold. Read more

• Microsoft plans to keep raising capital spending into fiscal 2027, after spending about $41 billion in one quarter on data centers. If Azure demand growth slows before this spending pays off, margins and free cash flow will suffer.
• Microsoft accounts for its OpenAI stake in a way that pulls OpenAI's swings between profit and loss directly into Microsoft's own reported net income each quarter. This adds volatility to Microsoft's earnings that has little to do with its core software and cloud business.
• Amazon Web Services and Google Cloud are also spending heavily on AI data centers, and compete directly with Azure for the same enterprise AI workloads. A shift in market share toward either competitor would slow Azure's growth rate.

• October 7, 2026Microsoft confirmed that it will report fiscal Q1 2027 results after the market closes on October 28, 2026.
• October 1, 2026Microsoft said Ryan Roslansky, head of the Office and Teams group and former LinkedIn CEO, will leave the company at the end of 2026. Office and Teams now report to the Copilot, Agents and Platform organization of Charles Lamanna.
• September 25, 2026Microsoft added new coding tools and an agent that works without stops to Copilot. The stock rose about 3.7% that day, to its highest close of 2026.