Microsoft delivered a strong quarterly earnings report with $81.3 billion in revenue—up 17% year-over-year—and net income of $38.3 billion, a 21% increase. The company also reported record cloud revenue exceeding $50 billion. Despite the positive numbers, Microsoft’s stock dipped on Thursday as investors expressed concern over the company’s aggressive spending, particularly on capital expenditures. Microsoft has already spent $72.4 billion in the first half of its current fiscal year—nearly as much as it did for the entire prior year. Last year, capital expenditures totaled $88.2 billion. A significant portion of this spending is tied to expanding data centers and infrastructure to support AI services for enterprise clients and major AI labs like OpenAI and Anthropic. The market’s unease centers on whether this massive investment will translate into sustainable growth. While Azure and Microsoft 365 saw slower-than-expected growth, Wall Street analyst Karl Keirstead of UBS noted that the slight shortfall in these segments is the main negative point being discussed. Still, Keirstead remains bullish and recommends buying the stock. CEO Satya Nadella spent much of the earnings call defending the investment strategy, emphasizing that demand for AI services is outpacing supply. He argued that Microsoft’s spending is not just justified but essential for long-term leadership in AI. Nadella highlighted user growth for Microsoft’s consumer-facing Copilot AI, claiming daily users of its AI-powered features—such as chat, news feed, search, browsing, shopping, and OS integrations—had nearly tripled year-over-year. However, he did not provide an actual user count, leaving the figure open to interpretation. In contrast, more concrete numbers were shared for enterprise-focused AI products. GitHub Copilot now has 4.7 million paid subscribers, a 75% increase from the previous year. This follows Microsoft’s earlier report that the tool had 20 million users total, including free-tier users. Microsoft 365 Copilot has also gained traction, with 15 million paid seats from businesses across the globe—out of a total base of 450 million paid M365 users. Nadella also spotlighted Dragon Copilot, Microsoft’s AI assistant tailored for healthcare professionals. He said it is now available to 100,000 medical providers and has been used to document 21 million patient encounters in the quarter—up threefold from the same period last year. This positions it as a direct competitor to startups like Harvey. Nadella and CFO Amy Hood stressed that the new data center capacity is already fully booked, underscoring strong demand across Microsoft’s AI portfolio. They believe the current investments will ultimately drive long-term profitability, even if short-term results don’t fully reflect that momentum.