Episode summary
Microsoft Drops Most Since 2020
Bloomberg Surveillance
· · Guests: Mandeep Singh
Summary
Microsoft’s drop was framed as a market reaction to two things: Azure growth came in at 38% when investors had hoped for 40%, and capital spending reached $37.5 billion, up 66% year over year. Mandeep Singh argued the selloff was mainly a sympathy move across software, not a sign that Microsoft’s fundamentals had broken. He said investors wanted to see AI translate into a clearer lift for the business, and that Microsoft’s announcement did not deliver that yet.
Singh contrasted Microsoft with Meta, saying Meta was rewarded because it showed a direct business benefit from AI, while Microsoft mainly showed heavier infrastructure spending. He also pointed to pressure from memory prices and legacy software exposure, saying Microsoft has more puts and takes than Meta because it spans Windows, server sales, GitHub Copilot, Office Copilot and Azure. The host and Singh both noted that Microsoft still has time to prove the strategy because its OpenAI contract runs through 2031.
The broader argument was that the selloff reflected sector weakness and raised expectations, not a single bad quarter. Singh said Microsoft is not in panic mode, but it does need more applications that generate revenue and move the needle.
Key takeaways
- Mandeep Singh said investors were disappointed that Azure printed 38% growth instead of the 40% they wanted.
- Singh said Microsoft’s $37.5 billion in capex, up 66% year over year, added to concerns that spending is rising faster than returns.
- Singh argued the stock drop was driven by sympathy with the wider software complex, which has already fallen 40% to 50% over the past three months.
- Singh said Microsoft still has time because its OpenAI contract runs through 2031.
- Singh said Microsoft needs more revenue-generating AI applications, not just infrastructure spending, to justify the investment cycle.
Notable quotes
“They clearly missed their buy side number for Azure growth last night”
“So everyone was hoping for 40%. They printed 38”
“CapEx came in higher than expected and it's up I mean, just for the quarter, 37 and a half billion dollars in CapEx, that's up 66% from a year earlier”
“Microsoft has got so many other businesses, like unlike Metta, which is all ads”
“But that contract is good through 2031. So nothing changes up until the 2031”
How the episode opens
They clearly missed their buy side number for Azure growth last night. So everyone was hoping for 40%. They printed 38.
And the reason they gave was they're using a lot of those GPU capacity for in-house applications. Now the contrast with meta was Meta said they're already seeing a big lift in ad convergence by applying A.I.. So that was the missing piece at Microsoft is they did not talk about a lift to their business.
See how it does it. It's just so curated. Come on.
Google's cleaning their clock and co-pilot sat turns to some guy is smart as you and says what do we do? What do they do? Well, they clearly need more applications that can generate revenue for them and really move the needle.
They talked about GitHub, co-pilot and office co-pilot that they are bundling, but their growth rates haven't moved when it comes to that part of the business. And look, the Azure side you cannot miss if that's your key metric, you can come in like, well, if you use this stuff a little bit. Co-pilot, It's just work to use it.
It struggles. Gemini is just they are Matt Miller, which I don't know CapEx came in higher than expected and it's up I mean, just for the quarter, 37 and a half billion dollars in CapEx, that's up 66% from a year earlier. Right.
Is a market still comfortable with that kind of stuff? Well, they applauded Metta last night. Metta said they will be spending 70% increase in CapEx for 2026.
So that was a green light for Mehta simply because they raised the top line. So expectations were 25%. They said we are going to do 30% next quarter and migrate.
My market was okay with raising CapEx.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- microsoft share drop
- ai spending
- azure growth
- capex spending
- cloud sales slowdown
Companies and tickers mentioned
- MSFT
- Microsoft
Watch the episode
Watch “Microsoft Drops Most Since 2020” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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