Microsoft Capital Expenditure Falls Short! "Compute Landlords" See Collective Decline in After-Hours Stock Prices

Zhihui Finance APP has learned that Microsoft (NASDAQ: MSFT) released its latest quarterly report on Wednesday, Eastern Time. Despite Azure’s cloud computing revenue surging 48% year-on-year, capital expenditure data fell short of market expectations. This raised concerns that cloud computing infrastructure partners such as CoreWeave (CRWV.US) and Nebius (NBIS.US) might see delays in data center capacity delivery. Following the news, the share prices of related companies dropped collectively in after-hours trading.

Capital Expenditure Misses Expectations, “Compute Landlord” Stocks Under Pressure

The financial report shows that Microsoft’s total capital expenditure and finance leases reached $45.2 billion this quarter, up roughly 30% year-on-year but below the average analyst estimate of $50.7 billion compiled by StreetAccount. The market believes this gap points to longer timelines for Microsoft’s compute infrastructure partners in delivering data center capacity.

Microsoft continues to make major investments in artificial intelligence infrastructure and is increasingly reliant on cloud compute lessors: at the end of last year, Microsoft signed a computing partnership agreement worth nearly $20 billion with Nebius, with the partnership extending into the 2030s. Meanwhile, Microsoft is also one of CoreWeave’s major clients.

After the financial report was released, CoreWeave and Nebius shares both dropped nearly 5% in after-hours trading, while IREN declined about 3%. Oracle, which soared 11% during regular trading due to a strong long-term revenue outlook, also surrendered part of its gains after the Microsoft earnings release, closing down 3%.

Notably, Azure revenue grew 48% year-on-year, far outpacing the growth in capital expenditure. Microsoft explained in its earnings presentation: “Revenue growth outpaced capital expenditure mainly due to timing differences between receipt and payment and a decline in the share of finance leases.”

Cloud Industry Faces Tightening Bond Market and Rising Consolidation Expectations

The newly emerged Neocloud sector has seen volatile performance in the market recently. As interest rates rise, concerns mount over the high costs of future bond financing and the potential exit of lenders, causing significant share price fluctuations among several related firms in recent weeks.

Worth noting, pessimistic industry expectations are intensifying. Last weekend, SpaceX CEO Elon Musk posted on social platform X, predicting that over 200 cloud compute lessors may go under, stating, “For any company without substantial revenue streams outside of AI data centers, the bond market has almost completely shut off financing.” SpaceX currently leases AI infrastructure to Anthropic and Google.

Last Monday, an analyst at research agency Gartner told CNBC that by 2030, 80% of cloud compute lessors are expected to be acquired, consolidated, or cease operations entirely.

Short-term Rebound Fades as Industry Divergence Intensifies

After a steep correction earlier this month, the Neocloud sector saw a moderate rebound earlier this week—CoreWeave rose 18% over the past three trading days, leading the sector. Wolfe Research analysts projected in a Tuesday report that the stock could rebound to the mid-$75 range. However, by Wednesday’s close, CoreWeave was at $63.93, with its after-hours decline post-Microsoft earnings dampening the current rebound momentum.

On Wednesday morning, Oracle’s robust long-term revenue forecast temporarily boosted confidence in the infrastructure sector narrative—the company expects to return to positive free cash flow in the second half of the next fiscal year. But as Microsoft and Alphabet both reported capital expenditures below expectations, market sentiment quickly turned cautious.

Also on Wednesday, Alphabet (Google’s parent company) reported capital expenditures of $51.36 billion, lower than the market’s expectation of $55.09 billion. With both cloud giants’ spending numbers and the pessimistic outlook from Musk and Gartner, financing and consolidation risks in the cloud computing infrastructure sector have become a focal point for the market.