👉 Background: Microsoft is one of the great success stories of the past decade. While it’s always been a behemoth - in the early 2000’s Microsoft kind of lost its way. But back in 2014, it pivoted the business to have a major focus on cloud computing - which has now become a core part of their revenue.

‍👉 What happened: Now, Microsoft has said that its revenue has jumped by 12% to nearly $70 billion USD for the last 12 months and its profit jumped 10% as well — both of which beat Microsoft's forecast and the investor markets’ expectations.

‍👉 What else: Microsoft also flagged that it would spend about $80 billion USD on data centres this financial year…not what investors want to hear just a few days after DeepSeek.


What's the key learning?

💡For big tech companies, balancing high growth with high spending is an ongoing challenge. On the one hand, investors cheer when revenue beats expectations, like Microsoft did here. But on the other hand, investors also get nervous when a company hints at massive spending.

💡The good news for Microsoft is that its AI business generated an “annual run rate” of $13 billion USD. But, investors are worried about when they’ll start to see an actual return on the AI investment, which keeps getting higher and higher each year.

💡 This pressure on AI investments has only heightened since we saw the rollout of DeepSeek over the past couple of weeks.