Hua Er Jie Jian Wen·2026-02-13 13:19Core Viewpoint - Microsoft has seen a 15% decline in stock price since the earnings report on January 28, primarily due to concerns over increased capital expenditures without a corresponding rise in Azure growth guidance and competition from new AI tools in the Office 365 business [1] Group 1: Capital Expenditure and Azure Growth - Microsoft is adjusting its computing power allocation, increasing the share for internal research and Copilot from approximately 10% to 20% [3][5] - For fiscal year 2026, capital expenditures are projected to reach $148 billion, a 400% increase from fiscal year 2022 [3] - Current computing power allocation is about 70% for Azure and 30% for Copilot and internal research, with new GPU allocations approaching a more balanced 60/40 split [6] Group 2: Iceberg Model of Computing Investment - Goldman Sachs introduced an "iceberg analogy" to explain Microsoft's computing capital expenditure strategy, distinguishing between visible investments that directly impact Azure and Office 365 and invisible investments crucial for long-term strategy [4] - If all new computing capacity is allocated to Azure, its growth rate could exceed 40%, indicating a strategic postponement of some growth potential for long-term investments [4][10] Group 3: Drivers of Increased Internal Allocation - Four structural factors are driving the increased demand for Microsoft's computing power, leading to a significant evolution in capital expenditure structure [7] - Azure AI computing power accounts for the largest share, with a multiplier of 4-5 times for "computing power/quarterly new revenue," translating to $0.20 to $0.25 in revenue for every $1 of capital expenditure [8] Group 4: Copilot Investment Strategy - Microsoft is positioning Copilot as a cost-effective enterprise-level LLM solution, priced at approximately $30 per user per month, compared to ChatGPT Enterprise at $60 [12] - Copilot is beginning to make a substantial contribution to M365 commercial cloud revenue, projected to reach $89 billion in fiscal year 2026 [13] - The adoption rate of Copilot is increasing among both internal employees and external customers, driving up computing power consumption [9]