Microsoft plunges 9.9%, losing $357 billion in market value — the second worst in U.S. stock history. What happened?

Microsoft’s earnings report exceeded expectations in revenue and profit, but AI capital expenditures surged 66% to $37.5 billion, and Azure cloud growth slowed, raising investor concerns about returns. The stock plummeted nearly 10% in a single day, evaporating $357 billion in market value, marking the second-largest single-day loss in U.S. stock history.
(Background: NVIDIA, Microsoft, and Amazon will invest $60 billion in OpenAI, with a valuation of $730 billion, intensifying the AI arms race)
(Additional context: Microsoft confirms it will cooperate with the FBI to provide BitLocker keys. Is your encryption truly secure?)

Table of Contents

• $37.5 Billion Capital Expenditure
• Azure Cloud: Still Growing Strong, but Momentum Slightly Slowing
  • $625 Billion Backlog: OpenAI Makes Up a Large Portion
• Domino Effect and Historical Positioning
• 2026: The Year of AI Investment Reckoning

Microsoft’s stock plunged 9.9 last night (29th), marking the largest single-day decline since March 2020’s COVID-19 outbreak. Market value evaporated by approximately $357 billion overnight, the second-largest single-day market cap loss in U.S. stock history, second only to NVIDIA’s plunge last year following the launch of low-cost models by China’s AI startup DeepSeek.

Ironically, Microsoft’s Q4 financial report released earlier was not bad: revenue increased 17% year-over-year to $81.3 billion, surpassing market expectations of $80.3 billion, with earnings per share of $4.14, also above analyst estimates of $3.97; net profit grew significantly from $24.1 billion last year to $38.5 billion, a 60% increase.

All numbers exceeded expectations, but investors voted with their feet. There are two main reasons: the scale of AI capital expenditure is concerning, and cloud growth momentum is slowing.

$37.5 Billion Capital Expenditure

Microsoft’s total capital expenditure and finance leases in Q4 reached $37.5 billion, a 66% surge compared to the same period last year, exceeding analyst expectations of $34.3 billion. About two-thirds of this was invested in “short-lived assets” like GPUs and CPUs. In other words, these funds are spent on AI computing infrastructure, which depreciates rapidly, and the return on investment is uncertain.

This figure prompts investors to ask: with so much money spent, where are the returns?

Azure Cloud: Still Growing Strong, but Momentum Slightly Slowing

On the other hand, Microsoft’s flagship Azure cloud business grew 39% year-over-year this quarter, slightly above the market expectation of 38.8%, but below the 40% growth rate of the previous quarter. The overall revenue for Intelligent Cloud was $32.9 billion, up 29%.

What worries the market is the forward guidance: Microsoft estimates next quarter’s Azure revenue will grow 37–38%. The overall trend is flattening and gradually declining. The company admits that the supply of AI compute power continues to lag behind demand, with capacity bottlenecks expected to persist until the end of this fiscal year. This means potential revenue opportunities are slipping away.

Microsoft CFO Amy Hood tried to reassure the market, stating that capital expenditure should not be directly compared to Azure revenue. She pointed out that if all new GPUs added in the first two quarters were allocated entirely to Azure, growth would be well above 39%. However, Wall Street clearly remains unconvinced.

$625 Billion Backlog: OpenAI Makes Up a Large Portion

A noteworthy figure is Microsoft’s “Remaining Performance Obligations” (RPO), which soared to $625 billion, a 110% increase year-over-year.

This represents contracted revenue yet to be recognized. However, 45% of this comes from commitments to OpenAI, raising concerns among some analysts about the quality and sustainability of these orders, considering OpenAI’s own financial pressures.

Domino Effect and Historical Positioning

Microsoft’s plunge also dragged down other tech giants. Alphabet and NVIDIA each temporarily lost over $100 billion in market cap, but Alphabet recovered and closed slightly up 0.7%, while Amazon fell slightly by 0.5%.

Miller Tabak strategist Matthew Maley bluntly stated:

It’s increasingly clear that Microsoft will not achieve strong returns from its massive AI investments, and the stock needs to fall to a more historically fair value level.

Wedbush analyst Dan Ives said that Wall Street “wants to see less capital expenditure and faster monetization of cloud/AI… but the actual results are the opposite.”

2026: The Year of AI Investment Reckoning

Currently, the four major hyperscale cloud providers—Microsoft, Meta, Alphabet, and Amazon—are expected to surpass $470 billion in capital expenditure in 2026, up 34% from approximately $350 billion in 2025.

But as the market no longer accepts the narrative of “we are heavily investing in AI” and begins demanding actual revenue conversion, Microsoft’s recent plunge may be the first shot in this collective awakening.

For Microsoft, the issue is not whether AI is the right direction; based on the $625 billion backlog, demand clearly exists. The real challenge is whether these expenditures can translate into stable and accelerating revenue growth before investor patience runs out.