Microsoft Faces Office Competition and Spending Scrutiny Amid Cloud Gains

Microsoft Corporation is seeing renewed institutional buying interest, according to MoneyFlows data, even as the company navigates new competitive pressures and scrutiny over its massive infrastructure spending. The stock has gained 10% year to date, bolstered by financial results from the first quarter of fiscal 2027 that demonstrated expanding sales across its core cloud operations.

For the first fiscal quarter, Microsoft reported total revenue of $92.3 billion, representing a 19% gain year over year. Cloud revenue advanced 30% to $63.9 billion, while per-share earnings reached $4.89, an 18% increase. Azure revenue climbed 48% to $33.2 billion, beating management guidance of 44% to 45%. The company's contracted commercial backlog, measured as remaining performance obligations, expanded 73% to $677 billion. Management guided for quarterly revenue of up to $97.1 billion and returned $10.2 billion to shareholders through dividends and stock buybacks.

Despite these gains, the stock faced pressure this week after artificial intelligence firm Anthropic introduced workplace tools, including a spreadsheet offering named Claude Sheets. Shares slid more than 3% to $530.39 on November 10 and slumped another 2.2% the following day over worries about competition with Microsoft Excel. Anthropic head of product Nicholas Lin stated that the software currently focuses on basic tasks rather than complex financial modeling. Microsoft 365 Cloud generated $27.778 billion in the first fiscal quarter, up roughly 17% and accounting for approximately 30% of total revenue.

Investors are also monitoring the escalating costs of expanding data center capacity. Microsoft Chief Financial Officer Amy Hood guided for capital expenditures to surpass $50 billion in the December quarter, noting that roughly 75% of capital spending goes toward short-lived assets such as central and graphics processing units. Free cash flow dropped about 27% to $18.6 billion last quarter as operating cash flow rose 29% to $58 billion.

Questions about capital allocations extend across the tech sector. In a third-quarter 2026 letter, Moon Capital Management highlighted that major hyperscalers, including Microsoft, are projected to invest about $1.2 trillion in capital expenditures in 2027 and $1.4 trillion in 2028. Meanwhile, reports that Microsoft is stepping back from certain neocloud projects with suppliers such as Nebius, IREN, and Nscale appear related to vendor execution delays and permitting issues rather than flagging customer demand.