Microsoft's stock has fallen more than 24% over 12 months, worse than the rest of the Magnificent 7, and investors have grown skeptical that its multibillion-dollar AI bet will deliver. The company reports fourth-quarter results on Wednesday with Microsoft 365, GitHub, and Azure all under pressure. Executives say compute capacity is so tight that Microsoft is evaluating rival clouds.
Microsoft's stock is down more than 24% from 12 months ago, significantly worse than the rest of the Magnificent 7, and investors have grown increasingly skeptical that the company's multibillion-dollar AI bet will deliver. They get a report card on Wednesday, when Microsoft releases its fourth-quarter earnings results.
AI tools press on Microsoft 365 and GitHub
Employees are questioning the company's plans to spend a record $190 billion this year to build AI infrastructure. As generative AI changes how people work, write software, and consume information, three core businesses hang in the balance: Microsoft 365, GitHub, and Azure.
Gartner analysts predicted earlier this year that AI would threaten to dethrone traditional productivity suites like Microsoft 365 and Google Workspace in a $58 billion market shakeup. GitHub keeps growing — an executive told employees the platform recently had its best month ever, though he didn't say by what measure. But upstarts have swarmed in as millions of engineers adopted Cursor and Anthropic's Claude Code, and surging AI usage has left GitHub with dozens of major outages this year.
Azure waits behind Microsoft's own AI products
Demand for computing infrastructure has outpaced Microsoft's ability to build new capacity, and executives say the company is still constrained even with this year's capital expenditures. Chief Financial Officer Amy Hood suggested earlier this year that Microsoft was prioritizing scarce computing resources for its own AI products before allocating the remainder to Azure customers.
Had the GPUs that came online in the first half of the fiscal year gone to Azure instead, Azure growth would have exceeded 40% instead of 39%, Hood said. That earnings report triggered a post-earnings stock decline of more than 10% as investors questioned the slower Azure outlook despite record AI spending. Microsoft previously reported $75 billion in Azure revenue for its 2025 fiscal year.
Microsoft shops competitors for cloud capacity
Despite the crunch, Microsoft is raising some Azure salespeople quotas by 30% this year, according to people familiar with the change. It is also turning to competitors for relief: following a series of GitHub outages, Amazon bailed Microsoft out.
Microsoft explored leasing Oracle cloud infrastructure but walked away over security and compliance concerns. One person familiar with the discussions said the company is now evaluating Amazon and Google for additional capacity: "We are shopping for capacity everywhere".
AI is beginning to challenge both assumptions that made Microsoft one of the world's most valuable companies: that it owns where people work, and where developers build software.
Source: Business Insider
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