Despite a solid Q3 2025 earnings report yesterday, shares in Microsoft (MSFT) sank on Thursday as investors worried about the company’s AI spending. The report beat analysts’ expectations on the top and bottom lines for revenue. Additionally, Microsoft said its AI business now has a $37 billion annual revenue run rate, up 123% year over year.
For the quarter, Microsoft saw earnings per share (EPS) of $4.27 on revenue of $82.89 billion. Wall Street was anticipating EPS of $4.04 on revenue of $81.46 billion, based on Bloomberg analyst consensus estimates. It also said it has remaining performance obligations of $627 billion, up 99% year-over-year, with a weighted-average duration of 2.5 years. Excluding OpenAI, RPO was up about 26%, which is more in line with season averages. However, its Capex for AI efforts in 2026 is far bigger than even the company itself forecasted.
Indeed, Microsoft (MSFT) said it anticipates Q4 capital expenditures of $40 billion, and said capex for the calendar year 2026 would reach $190 billion. The company’s previous forecasts had annualized AI investment closer to $150 billion. AI spending has been a debatable topic on Wall Street when it comes to viewing big tech companies like Microsoft, Amazon, and Alphabet. For Microsoft, the Windows developer is one of the biggest AI investors out there, and fortunately, it has made some solid revenue back. However, bubble fears remain, and some investors are hesitant to go all-in on MSFT.
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Furthermore, another worry comes from the PC industry. On the PC front, Microsoft’s More Personal Computing segment saw sales of $13.2 billion compared to expectations of $12.64 billion. The PC industry is dealing with the impact of the global memory shortage caused by the worldwide data center build-out. That’s forcing some manufacturers to raise PC prices or eliminate certain low-cost models, cutting into overall sales
Microsoft (MSFT) had climbed about 20% off its March lows before earnings, trading around $427 before the report. Now, MSFT is trading just above $400 at press time.