Microsoft Corporation (NASDAQ:MSFT) is one of the stocks that Jim Cramer shared takes on, along with navigating market shortages. Cramer noted that the company’s CapEx budget was “too high,” as he remarked:
Now, tonight, we heard from three members of the Magnificent Seven. They were wildly different results. They’re not shortage, they’re just idiosyncratic, as we say. Microsoft reported a seemingly better-than-expected quarter, nice top and bottom line beat. But its stock sold off hard in after-hours trading. Look, I’ve been telling you to watch that Azure, their cloud infrastructure business, capital expenditures.
Wall Street’s gotten worried about all the investment in artificial intelligence. On Azure and other services, Microsoft did okay. 38% growth on constant currency basis, not enough to satisfy Wall Street. More importantly, though, Microsoft’s capital expenditure budget, too high, higher than expected, up 66% year-over-year. That’s not what the market wants.
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Microsoft Corporation (NASDAQ:MSFT) develops software, hardware, and cloud-based solutions. The company provides products like Windows, Azure, Office, LinkedIn, and Xbox. Cramer analyzed the recent decline in the company’s stock during the January 26 episode. The Mad Money host stated:
Next up, Microsoft had the same problem when it reported on the same night as Meta in late October. All their numbers for the reported quarter looked great, but after previously saying that their CapEx growth in fiscal 2026 would be lower than it was in fiscal 2025, they basically took that back and said the opposite was now true. Oh man, did they kill their stock. CapEx growth will be higher this year than it was last year, so the stock got crushed. The other issue with Microsoft’s last quarter, they projected a slight decline in the growth rate of their Azure cloud business… Even as management explained that that was purely due to supply constraints, not a decrease in demand.
Throw in the fact that Microsoft had some guilt by association when investors grew concerned about the prospects of its close partner OpenAI late last year, and you can see why Microsoft stock has just been pummeled, down 13% since the last report. So, from Microsoft, I want to see two things. First, no incremental increases to the spending outlook. Microsoft speaks somewhat vaguely on this subject, but I think investors just want to hear that the company’s CapEx budget isn’t growing like a weed. Second, an upside surprise for Azure growth would be a major positive. That might be a tall order, but it would be very encouraging if Microsoft can deliver a two-year Azure growth rate closer to 39% than they’ve done in the past two quarters, rather than the 36% number that’s expected.
These are big numbers… though. Club members know I expect some real upside here. I don’t know if they can blow out the 39 number. At the same time, we want to see some positive commentary about Microsoft’s Copilot AI functionality for Windows, as investors seem to be losing faith in this product, treating it like the next Clippy. And it certainly wouldn’t hurt for the company to make clear that its core Windows Enterprise software suite is not vulnerable at all to the rise of generative AI platforms that can help software engineers build their own applications… It would inspire a lot of confidence if Microsoft would tell you that they do have a moat against that.
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Disclosure: None. This article is originally published at Insider Monkey.
