From Bloomberg Markets and Finance.

Mandeep Singh, Global Head of Tech Research for Bloomberg Intelligence, discusses Microsoft’s biggest drop since 2020 and what that says about overall AI spending.

Microsoft Corp. plunged the most in almost six years after reporting record spending and slowing cloud sales growth, fueling investor concerns that it could take longer than expected for the company’s AI investments to pay off.
The shares sank by as much as 11% to $429.24, for the biggest intraday slide since March 2020.
Capital expenditures for the fiscal second quarter hit $37.5 billion, up 66% from a year earlier and exceeding analyst estimates for $36.2 billion.
The Azure cloud-computing unit posted a 38% revenue gain during the quarter when adjusting for currency fluctuations, just meeting analysts’ projections. That growth rate slowed — by a percentage point — from the prior quarter. The company expects Azure sales to rise 37% to 38% in the current quarter.
“One of the core issues that is weighing on investors is cap ex is growing faster than we expected, and maybe Azure is growing a little bit slower than we expected,” Morgan Stanley analyst Keith Weiss said during an analysts’ call. Investors, he said, were concerned about the return on that spending.
Chief Financial Officer Amy Hood responded by saying that a chunk of cloud capacity is going toward internal teams, which boosts products such as Copilot. Had all of the new capacity gone toward Azure, the growth rates would have been notably higher, she said.
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