Microsoft (MSFT) Traded Lower as Its Reported Azure Cloud Growth and Forward Guidance Fell Short of Expectations

Core Insights - The Alger Spectra Fund's fourth-quarter 2025 investor letter indicates a strong performance in the US equity market, with the S&P 500 rising by 2.7% due to better-than-expected corporate earnings and a supportive macroeconomic environment [1] - The letter highlights the divergence in market performance, particularly the scrutiny surrounding AI investments, while also noting an increase in U.S. business spending driven by demand for AI infrastructure and tax incentives [1] - Despite the overall market strength, Class A shares of the Fund underperformed the Russell 3000 Growth Index in Q4 2025, with specific sectors contributing differently to performance [1] Company Insights - Microsoft Corporation (NASDAQ:MSFT) is identified as a key stock in the Fund's portfolio, with a one-month return of -5.17% and a 52-week gain of 7.19% [2] - The company operates through three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, and is seen as a beneficiary of corporate digitization [3] - Microsoft reported a year-over-year growth of 39% in Azure cloud services, but its stock performance was impacted by lower-than-expected growth guidance and capacity constraints [3] - Demand signals for Microsoft improved, with commercial bookings up approximately 111% year-over-year and remaining performance obligations rising by 51% [3] - To address capacity issues and support AI/cloud workloads, Microsoft plans to increase capital expenditures to around $30 billion in the current quarter, with expectations for higher CapEx growth in fiscal 2026 compared to fiscal 2025 [3]