Microsoft Earns 31% More Than It Did a Year Ago and Is Worth Less

Microsoft reported strong fiscal 2026 results with net income up 31% to $133.7 billion and revenue up 18% to $331.8 billion. However, its market cap declined 4.5% year-over-year as investors reassessed the company's valuation from 37x to 27x earnings. The primary concern is Microsoft's massive capital expenditure surge to $175 billion for calendar 2026, which now exceeds its operating income, raising questions about the return on investment for AI infrastructure spending.