Microsoft's stock price has plummeted 23% this year! Soaring capital expenditures and AI concerns have become the two major "pain points," and this month's financial report will be a key test

According to Zhitong Finance APP, some adverse factors impacting Microsoft's (MSFT.US) stock price are unlikely to dissipate in the short term. Goldman Sachs analyst Gabriela Borges pointed out in a recent report released on Monday that Microsoft's stock price has fallen 23% this year mainly due to two factors. First, capital expenditures have continued to rise, but sales from the Azure cloud business have not been adjusted upward accordingly. This has reignited market concerns about return on investment and Azure's competitive position relative to rivals like Amazon's Amazon Web Services. Second, there are ongoing market concerns that Microsoft's enterprise office applications (such as Office 365) may be impacted by competing AI products, such as Anthropic's Claude Cowork. This concern partly stems from the market's perception that Microsoft's Copilot feature lags behind other AI tools.

Microsoft plans to announce its earnings report after the market closes on April 29. Analysts added, "We believe that ahead of the earnings release, the risk and reward are roughly balanced. The short-term fundamental outlook is mixed, but investor expectations have already been lowered."

After releasing a disappointing quarterly earnings report on January 28, which caused Microsoft's stock price to plummet nearly 10%, Microsoft needs to rebuild investor confidence. The focus for investors is the company's capital expenditure of up to $37.5 billion to build data centers that support its AI development. The market interprets this as indicating that Microsoft's profit margins will face pressure in the coming quarters.

Wedbush technology analyst Dan Ives stated, "Wall Street originally hoped to see less capital expenditure and a faster monetization of cloud and AI, but the reality is quite the opposite. We have always believed this is a multi-year development process, and Microsoft needs to continue focusing on data center construction as more customers embark on the AI journey."

However, Wall Street's excessive focus on capital expenditures has overshadowed the fact that Microsoft is performing well in other areas. Microsoft reported robust performance, with revenue reaching $81.3 billion, a 17% year-over-year increase. This performance was primarily driven by the company's intelligent cloud division, particularly the Azure business, which saw revenue growth of 39% due to enterprises accelerating their transition to AI-driven infrastructure.

Meanwhile, Wall Street's expectations for Microsoft's earnings per share (EPS) remain stable, which may reflect strong performance in its core business areas. JP Morgan analyst Mark Murphy stated, "In our view, the bigger picture is that both of Microsoft's two core business pillars are nearing $100 billion in scale—Azure business, despite capacity constraints, still maintains a growth rate of over 30%; Microsoft 365 commercial business continues to see double-digit growth. Additionally, the company has achieved over 20% growth in both revenue and EPS for three consecutive quarters."