Ever since late October, MSFT stock has been in a corrective mode, dropping from its high around $553 following the first quarter earnings.
- Microsoft has announced multi-billion dollar investments in the U.A.E., Portugal, India, and Canada.
- On a YTD basis, MSFT stock has outperformed AAPL and AMZN in the ‘Mag 7’ pack.
- DA Davidson’s Gil Luria was bullish, citing Microsoft’s top position in OpenAI spending as key to its growth as a hyperscaler.
Microsoft Corp. (MSFT) stock appears set to retest its 200-day moving average after nudging it once in late November, as the stock has faced resistance near the $492 mark in the last few weeks.
Ever since late October, MSFT stock has been in a corrective mode, dropping from its high around $553 following the first quarter earnings.
Despite an upbeat revenue and earnings print, MSFT stock witnessed some pressure after finance chief Amy Hood signaled that capital spending will accelerate this fiscal year. While November’s rebound helped restore some confidence, the key question now is whether the stock can hold its support level in the coming days.
Q1 Results Show Cloud Momentum
Microsoft’s first-quarter results surpassed Wall Street’s expectations on both revenue and earnings, thanks to ongoing momentum in its cloud business. The company reported an earnings per share (EPS) of $3.72 on revenue of $77.7 billion, compared to $3.30 EPS and $65.6 billion last year.
Commercial cloud revenue rose 26% to $49.1 billion, with Intelligent Cloud, including Azure, contributing $30.9 billion and beating analyst estimates.
Still, costs climbed sharply, with capital expenditures surging 74% to $34.9 billion, driven largely by heavy investment in GPUs and CPUs to meet growing AI-related demand.
However, JPMorgan, Citi, Wells Fargo, and Morgan Stanley raised their target prices for the stock, citing strong Azure growth and elevated booking metrics.
AI Investment Spree
Microsoft announced investments totaling more than $7.9 billion in the U.A.E., including more than $5.5 billion to expand AI and cloud infrastructure. This is part of a broader $15.2 billion AI initiative in the country.
Last month, the software giant announced investments of $10 billion in AI infrastructure at a data center in Portugal, marking one of Europe’s largest AI investment projects. The company will partner with Start Campus, Nscale, and NVIDIA to deploy 12,600 next-generation NVIDIA GPUs at the site.
It is also reportedly expanding its global data-center push, including plans for an AI “super factory” comprising two-story facilities in Atlanta, and a commitment of up to $5 billion to Anthropic.
Earlier this week, Microsoft announced $23 billion in new AI investments, earmarking $17.5 billion for India starting in 2026 and over C$7.5 billion ($5.42 billion) in Canada over the next two years to expand its cloud capacity.
Analysts remain bullish on Microsoft’s AI strategy. DA Davidson’s Gil Luria reiterated a ‘Buy’ rating last week, noting that Microsoft’s leading position in OpenAI spending should maintain its status as the fastest-growing hyperscaler.
The ‘Magnificent 7’ Comparison
Despite MSFT stock’s recent downturn, its year-to-date gains hold above 12%. This is almost similar to Apple’s (AAPL) 12% gains in the same period. Amazon.com Inc. (AMZN) has recorded 4% gains while Tesla (TSLA) has risen over 15%. Nvidia (NVDA) and Google-parent Alphabet Inc. (GOOG, GOOGL) have been the standout stocks this year, soaring more than 35% and 67%, respectively.
How Did Stocktwits Users React?
Retail sentiment on Stocktwits turned ‘bullish’ from ‘neutral’ a day earlier, accompanied by ‘high’ message volumes.
One Stocktwits user was skeptical about the stock’s technicals.
However, another sees a potential upward trend.
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