Microsoft Heads Into Earnings With AI Infrastructure Selloff and $190 Billion Capex Pledge on Investors' Minds
Published on 07/20/2026 at 13:32 | Redaktion boerse-global.de
With nine days to go before Microsoft reports fiscal fourth-quarter results on July 29, the stock is caught between a sector-wide rotation out of AI infrastructure plays and mounting scrutiny over the scale of the company’s capital spending. Shares have been hovering near €342.90, down 0.44% from last Friday’s close of €344.40, and remain stuck just below their 50-day moving average of €347.03.
The stock’s recent slide — roughly 21% over the past twelve months and 17% year to date — has been driven by profit-taking in high-flying technology names rather than a fundamental loss of confidence, according to market observers. Apple, Amazon, and Microsoft all managed to close the previous week in positive territory despite a late-session pullback. Even so, the broader tech landscape has been shaken: the Nasdaq-100 shed roughly 4% in a week after IBM lost about a quarter of its market value in a single session, and the Philadelphia semiconductor index posted its steepest weekly decline since April 2025, falling 10%.
Against that backdrop, Wall Street is recalibrating its outlook for Microsoft. Citi trimmed its price target from $620 to $570, Mizuho from $515 to $490, and Wells Fargo from $650 to $625, all while maintaining buy ratings. Evercore bucked the trend by raising its target from $510 to $525. Bank of America kept its $500 target and buy recommendation, highlighting an expected Azure growth rate of 39–40% and a cloud backlog of $627 billion, of which roughly a quarter is projected to convert into revenue within twelve months. BNP Paribas is even more bullish on the cloud franchise, forecasting Azure expansion of 41% in the coming quarter — above the consensus estimate of around 40% — together with 7 to 8 million new Copilot users.
Copilot itself has crossed the 20?million mark for paying users, and Microsoft’s annualized AI revenue run rate has surged 123% year over year to $37 billion. The cloud business delivered $54.5 billion in the most recent period at a 66% gross margin. Consensus expectations for the fourth quarter stand at earnings per share of $4.24 on revenue of roughly $86.66 billion.
Should investors sell immediately? Or is it worth buying Microsoft?
Separately, a company-specific rumor added a layer of noise last week: speculation is swirling that Microsoft’s next-generation Xbox, code-named Project Helix, will include a disc drive. The timing drew extra attention because Sony had just announced it would end production of physical PlayStation discs in 2028. Microsoft has not confirmed any hardware plans, and official details on the new console remain absent — information continues to emerge through leaks and developer comments rather than company announcements.
The more consequential debate, however, centers on the sheer size of Microsoft’s investment outlays. The company expects capital expenditures of roughly $190 billion for the current fiscal year, with more than $40 billion earmarked for the fourth quarter alone. Bank of America calculates that this spending already exceeds the combined operating cash flow of the five largest hyperscalers — Alphabet, Microsoft, Amazon, Meta, and Oracle. For the group as a whole, capex is forecast to reach $725.1 billion in 2026, nearly five times the 2023 level.
To fund that buildout, the hyperscalers are turning increasingly to the bond market. Their aggregate bond issuance is projected to hit $194.1 billion by 2026, compared with just $20.1 billion in 2024. Microsoft, with a debt-to-EBITDA ratio of 0.6, stands on relatively solid ground; KB Securities estimates the company has roughly four years of financing capacity before leverage reaches critical thresholds. That contrasts sharply with Oracle, whose debt-to-EBITDA ratio stands at 5.6 and whose credit rating S&P downgraded to BBB- — one notch above junk — in early July.
Microsoft at a turning point? This analysis reveals what investors need to know now.
At a price-to-earnings ratio of 22.9, Microsoft now trades at a significant discount to the Nasdaq-100’s 34.5. The stock is roughly 8.8% below its 200-day moving average of €375.91, and the relative strength index of 51.6 suggests no clear directional bias. Whether the July 29 numbers can calm the debate over AI spending will likely hinge on whether Azure’s growth hits the promised 39–40% target — and whether investors see the colossal capital outlays as sowing the seeds of future revenue or as a strain on free cash flow that has already drawn the attention of bond markets.
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