Some investors doubt that heavy AI infrastructure spending will pay off, and several tech stocks are falling. Microsoft shares have moved the other way, helped by Azure growth and a new Copilot app.
Microsoft shares have gained around 8% over the past month, even as some AI stocks fall on doubts about data center costs. Optimism about Azure cloud growth and the latest Copilot AI update drove the move, according to The Motley Fool.
Investors worry that the spending may not turn into significant sales or earnings for leading AI companies. S&P Global estimates that AI infrastructure spending could surpass $1.3 trillion globally next year.
Azure revenue tops $100 billion
Microsoft will spend about $175 billion on capital expenditures this year, most of it on AI infrastructure. The company's results suggest the money is paying off so far.
In its Q4 fiscal 2026 report, Microsoft said that "Customer demand continues to exceed available capacity" for Azure, according to the company's July results. Azure revenue passed $100 billion for the first time, up 41% from the previous year.
Azure's parent segment, Intelligent Cloud, accounts for about 44% of total revenue. Management estimates that Azure revenue will rise 45% in fiscal 2027. Microsoft holds the second-largest global cloud market share at 21%.
Copilot app adds subscribers
Microsoft's new Copilot app can run on a desktop, similar to Anthropic's Claude, and helps users code. It also has more workplace integrations and completes some tasks autonomously. Microsoft wants it to be the new operating system for work.
Even before the new version launched, the app had 30 million paid subscribers, a 50% jump from a few months earlier. With its current trajectory, Microsoft could likely double its paid Copilot seats by the end of fiscal 2027.
Valuation sits below the tech average
Microsoft shares have a trailing price-to-earnings ratio of 27, compared with a tech sector average P/E ratio of 33.
Source: The Motley Fool
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