According to Windows Central, Microsoft’s FY26 Q2 earnings reported $81.3 billion in revenue, a 17% year-over-year jump, and $38.3 billion in operating income. CEO Satya Nadella announced that the daily user base for its Copilot AI has grown “nearly 3x year-over-year,” spanning chats, search, and OS integrations. He also revealed GitHub Copilot now has 4.7 million paid subscribers, up 75%, and Microsoft 365 Copilot has reached 15 million paid seats. However, the company’s shares fell about 6% in after-market trading following the report. Investors are concerned about capital expenditures, which have hit $72.4 billion so far this fiscal year, largely for AI infrastructure serving enterprises and labs like OpenAI and Anthropic.
The Wall Street Skepticism
Here’s the thing: the numbers look fantastic on the surface. Revenue up, user growth exploding, and a massive installed base of 450 million paid seats to potentially sell into. But Wall Street isn’t buying the narrative, at least not today. The immediate 6% stock drop tells you everything. Analysts like UBS’s Karl Keirstead pointed out that both the Azure cloud and Microsoft 365 segments fell short of expectations. That’s a huge red flag for investors. They’re looking at this massive $72.4 billion capex number—on track to blow past last year’s $88.2 billion—and asking a simple question: where’s the proportional return? It seems like the market is saying, “Great, you have users, but is this spending actually translating to the bottom-line growth we expected in your core businesses?” And that’s a fair question.
The Usage vs. Demand Paradox
Nadella’s “3x” growth stat is impressive, but it’s also a bit vague. Daily user base can mean a lot of things. Is someone who asks Copilot in Windows for the weather once a day counted the same as a power user automating their entire workflow? Probably. This gets to a deeper issue hinted at in the report: the struggle with demand. Remember last year’s report from The Information? It claimed Microsoft’s sales teams were missing goals because of weak demand for Azure AI services. Microsoft denied it, but the sentiment lingers. There’s a gap between “availability/usage” and “companies writing huge checks.” Getting 15 million paid M365 Copilot seats is a win, no doubt. But against that 450 million seat total, it’s still only about 3% penetration. The growth is there, but the climb to make it a fundamental, revenue-driving pillar is steep and expensive.
The OpenAI Factor and The Long Game
Let’s talk about that spending. A huge chunk is going to build infrastructure for others, including OpenAI, which accounts for about 45% of “highlighted commitments.” That’s wild. Microsoft is essentially the arms dealer in the AI race, and that’s a brilliant, capital-intensive position. They did net a $7.6 billion income increase from their OpenAI investment, so it’s not just spending into a void. Nadella is clearly playing a long game, betting that by building the world’s AI infrastructure and embedding Copilot into every piece of software, the returns will be astronomical down the line. He might be right. But in the quarterly results hamster wheel of Wall Street, “down the line” often sounds like “unproven and costly.” The skepticism isn’t just about money; it’s about timing and proof. Can Microsoft convert this explosive user growth into sustained, profitable business growth before investor patience runs thin? That’s the multi-billion dollar question.
