Since Satya Nadella took over as CEO of Microsoft in February 2014, the company's stock has soared by approximately 1,360%, or roughly 15 times its original value. This translates to an annual growth rate of 27%, a dramatic turnaround from the 14 years of near-zero growth that preceded Nadella's tenure. However, the future outlook for Microsoft is less certain, as the company faces heavy spending on AI and cloud computing to remain competitive.
The capital expenditures for Microsoft have surged, reaching $116 billion in fiscal 2026, up from $65 billion the previous year and $44 billion in fiscal 2024. This trend is not unique to Microsoft, as its competitors Amazon and Alphabet are also investing heavily in cloud infrastructure. Despite these investments, Microsoft's revenue growth has been modest, with a 17% increase in fiscal 2026, slightly above the 15% gain in fiscal 2025.
Microsoft Cloud revenue grew by 27% year over year in fiscal 2026, unchanged from the prior year. This performance lags behind peers like Amazon Web Services, which saw a 31% revenue growth in the first half of 2026, and Google Cloud, which experienced a 73% revenue gain. Microsoft's share price is also on track to lag the S&P 500 for a third straight year, raising questions about the effectiveness of its AI spending.
While Microsoft's forward P/E ratio is the lowest at 27, its peers trade at only a slight premium, which may not be enough to attract investors. The company's future growth rates remain uncertain, and early indications suggest that its competitors may have gained more traction from their AI investments. As a result, investors may need to reconsider whether Microsoft is the best buy in the current market.