Microsoft stock (NASDAQ: MSFT) plunged over 12% on Thursday, erasing $450 billion in market value after the company reported earnings that beat Wall Street’s expectations.
Despite solid numbers, Microsoft disappointed investors on the biggest question they wanted answered: Will this capital expenditure explosion actually pay off?
The stock fell sharply despite revenue of $81.3 billion (beating the $79.5–$80.6 billion consensus) and a 24% earnings-per-share increase at $4.14 versus the $3.93 expectation.
CNBC’s Jim Cramer pushed back against the panic, framing the sell-off as a classic investor overreaction.
Cramer, who owns Microsoft in the CNBC Investing Club portfolio, reminded viewers that the market’s initial shock to strong earnings often creates a bargain.
The real issue behind Microsoft stock collapse
The headline numbers initially appeared strong on the surface.
Microsoft Cloud revenue crossed $50 billion for the first time ever, hitting $51.5 billion and growing 26% year-on-year.
Yet beneath this strength lay the culprit as Azure and other cloud services grew 39% year-on-year, compared to 40% the previous quarter.
This deceleration came as a major red flag for investors who concluded that even with record capex spending, cloud growth is moderating.
More damaging was the capex shock.
Microsoft spent $37.5 billion on capital expenditures in the October-December quarter, a 66% year-over-year surge that landed roughly $3 billion above consensus.
About two-thirds went to GPUs and compute infrastructure to power its AI buildout.
Moreover, Microsoft has a $625 billion demand backlog, but roughly half is tied directly to OpenAI, raising concentration risk in analysts’ minds.
If OpenAI stumbles raising capital or hits deployment delays, Microsoft’s revenue certainty takes a hit.
Why Jim Cramer thinks this is a buy opportunity
Jim Cramer has consistently argued that the sell-off misses the bigger picture.
In an analysis, he noted Microsoft “is doing fine” and that Azure’s projected slowdown may stem purely from supply constraints, not weakening demand.
His idea is that investors are conflating near-term capex pain with long-term value destruction.
He frames buying weakness as the classic investor discipline of separating temporary sentiment from durable business fundamentals.
Cramer acknowledges the risks. Slower Azure growth than historical norms, rising capex without margin payoff yet, and OpenAI concentration all warrant close monitoring.
His criteria for confidence are that Azure must show acceleration and management must signal capex budget discipline going forward.
Here’s what investors should watch next quarter: Does Azure growth reaccelerate as supply constraints ease?
Does capex guidance stabilize or resume climbing? And does Microsoft’s commanding backlog and Copilot adoption deliver revenue upside that justifies the spending?
For Cramer’s view, the current price weakness isn’t a red flag; it’s an entry point.
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