Microsoft Reports Record Spend on AI Hardware, as Earnings Beat Estimates

Bloomberg's Anarug Rana said that despite a positive earnings report from Microsoft, investors have high expectations and are concerned about the company's record spending on AI hardware. Rana says that risks remain in the tech space as companies fight it to become the future of AI, but it is likely that the high spending will pay off for Microsoft.

Microsoft Corp.’s spending surged to a record high in the last three months of 2025, sending the shares down amid investor concerns that it will take longer than expected for the company’s AI investments to pay off.

Capital expenditures for the period hit $37.5 billion, exceeding analyst estimates for $36.2 billion.

Microsoft shares fell about 4% in extended trading after closing at $481.63 in New York.

Total sales increased 17% to $81.27 billion during the fiscal second quarter, while profit was $5.16 a share, the company said in a statement on Wednesday. The net income figure was boosted by gains from Microsoft’s investment in OpenAI, which lifted per-share earnings by $1.02.

Meta Platforms Inc. will double capital spending to as much as $135 billion this year, an all-in bet on artificial intelligence as the US tech giants battle it out for supremacy in the next wave of technological advancements.

Tesla Inc. will spend $20 billion this year on pursuits including AI, self-driving vehicles and robotics - almost double Wall Street estimates — and plow another $2 billion into Chief Executive Officer Elon Musk’s xAI startup. Musk also said Tesla needs to build its own semiconductor factory.

Investors should look forward to “a major AI acceleration” that’s been brewing within the tech industry for over a year, Meta CEO Mark Zuckerberg said on Wednesday’s earnings call. After an overhaul of the company’s AI program in 2025, Zuckerberg said Meta will soon release new models and products. The stock rose 7.9% after results beat expectations and Meta’s strong ads business convinced investors its planned splurge is viable.

Microsoft Corp.’s results highlighted the fragility of investor sentiment around AI and its funding. The stock dropped 6.5% in premarket trading after the company reported quarterly capex numbers above Wall Street estimates, yet barely met expectations for its Azure cloud business.

Silicon Valley’s spending spree rippled around the world. Hardware providers like Samsung Electronics Co. and SK Hynix Inc. — two makers of the memory chips that go into Nvidia Corp.’s essential AI accelerators as well as data center servers — reported profits that grew several-fold. ASML Holding NV, the sole provider of the cutting-edge lithography machines needed for advanced semiconductors — also smashed estimates.

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