Microsoft (MSFT) will release its second-quarter fiscal 2026 financial results on Jan. 28. While the technology giant has been delivering strong financial results with expanding margins, MSFT stock has struggled to gain traction and has recently pulled back.
A major factor weighing on the stock is investor unease around Microsoft’s rising capital expenditures (capex). As the company scales up its artificial intelligence (AI) and cloud infrastructure, concerns have emerged that spending is expanding too aggressively amid broader market fears of an AI investment bubble.
Investors’ worries intensified after Microsoft disclosed Q1 capital expenditures of $34.9 billion, significantly exceeding its prior guidance of $30 billion. Management attributed the increase to surging demand for AI workloads and cloud capacity, especially within the Azure platform.
While elevated capex has made investors cautious, technical indicators suggest MSFT stock has room to run. Microsoft’s 14-day Relative Strength Index (RSI) currently sits at about 50, well below the 70 threshold typically associated with overbought conditions. This level implies that shares could rebound if the upcoming earnings report and management’s outlook help reassure the market that higher capital spending will translate into durable growth and improving returns over time.
Derivatives markets are projecting a moderate reaction to MSFT’s earnings release. Options pricing implies a post-earnings move of about 4.3% in either direction for contracts expiring Jan. 30, which is lower than Microsoft’s average earnings-related move of 5.2% over the past four quarters. Investors should note that Microsoft stock declined 2.9% following its previous earnings announcement.
The momentum in Microsoft’s business will likely sustain in Q2, driven by cloud and AI strengths. Management has guided for Q2 revenue in the range of $79.5 billion to $80.6 billion, representing year-over-year (YOY) growth of 14% to 16%.
The company’s cloud business remains the key growth driver. In the prior quarter, Microsoft Cloud revenue reached $49.1 billion, up 26% from the same period last year. Within the segment, the Intelligent Cloud business delivered $30.9 billion in revenue, up 28% YOY. Azure and related cloud services continue to see strong demand for core infrastructure offerings, with revenue climbing 40% YOY.
