Microsoft remains range-bound as AI spending stays in focus

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Microsoft holds range near key support

Backlog supports the growth story

Commercial backlog reached $678 billion, and the company noted that all sequential RPO growth in the quarter came from customers outside the companies building frontier models. This is important for assessing the quality of demand, as growth is becoming less dependent on a limited number of the largest AI counterparties.

The key question remains the same, but it is becoming increasingly important: how quickly Microsoft can turn record investment in computing capacity into profitable growth. CapEx in the latest quarter came in at around $41 billion, with roughly two-thirds spent on shorter-lived assets, primarily CPUs and GPUs. Following changes to its data center structure, the company estimates capital spending for calendar 2026 at around $175 billion and at the same time says that demand for Azure still exceeds available capacity.

For the current quarter, Microsoft is guiding for Intelligent Cloud revenue of $40.95–41.25 billion and Azure growth of around 45% in constant currency. Management still expects double-digit revenue and operating income growth in FY27, although capital expenditure is also expected to increase in the next fiscal year.

Copilot and infrastructure broaden the focus

The market is also getting several new signals. On September 21, Microsoft announced that all of its data centers in India are now AI-ready, while the new India South Central region in Hyderabad will become a strategic hub for Asia and the Global South. Analysts are also gradually shifting some of their attention away from Azure alone toward the monetization of Copilot and Microsoft 365. Jefferies sees this area as an underestimated source of future growth, particularly through higher-priced enterprise packages and usage-based AI services.

On the other hand, the company continues to cut costs and has announced a new round of layoffs affecting, among other areas, Xbox, cloud, and AI divisions. For now, this looks more like a reallocation of resources toward the most capital-intensive areas rather than a sign of weakening demand.

$490 support becomes increasingly important

MSFT is still in a consolidation phase and continues to trade within a range, where the bulls’ inability to break resistance around $510–520 increases the risk of a break below $490 support and a decline toward $470–460. Overall, as noted in Microsoft holds its range as AI spending stays in focus, the long-term outlook remains constructive, so declines in MSFT still represent a possible opportunity to buy at a better price.

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