Who could forget those heady days when Microsoft Corp. Chief Executive Officer Satya Nadella looked like the smartest man in tech? When ChatGPT emerged in late 2022, his decision to back OpenAI put Nadella’s company at the forefront of the AI boom. The top AI models would be embedded in its software and available on its cloud platform exclusively.
But more recently, the relationship has cooled and with it the perceived value of Nadella’s foresight. Microsoft has now invested in Anthropic and looked to incorporate its capabilities into its products. And OpenAI, hungry for computing power, has turned to Oracle Corp., Alphabet Inc.’s Google and Amazon.com Inc.
All this AI polyamory has put Microsoft’s eggs in a few more baskets, but it has also highlighted that Microsoft’s early mover advantage has run its course. The AI sparkle that illuminated a market value that more than doubled has diminished. Since their peak last October, Microsoft shares have fallen by about 11% and, until Wednesday’s close, had been flat since the start of 2026.
If Wall Street had been hoping that quarterly results would bring a lift, it was left disappointed. Shares fell as much as 8.1% in after-hours trading because capital expenditures came in higher than analysts’ already lofty expectations — $37.5 billion compared with a consensus of $36.2 billion, according to Bloomberg data. A beat on total sales and a profit up by almost a quarter from the period a year earlier — not including the $7.6 billion impact of its OpenAI investment, now on its balance sheet — weren’t enough to offset that jolt. “One of the core issues that is weighing on investors is capex is growing faster than we expected,” Keith Weiss of Morgan Stanley remarked in the earnings call, “and maybe Azure is growing a little bit slower than we expected.” In other words: Where’s the return on investment?
The thorny issue of ROI is stalking all of the top AI players, not just Microsoft. But the pressure has mounted on Nadella because of the shifting narrative of the AI industry. The AI story of 2026 so far is one that says Google, with its Gemini model, is crushing it with consumer use cases and benefiting from the availability and lower cost of its own chips. At the same time, Anthropic’s coding capabilities are at the leading edge of redefining software engineering, and its Cowork “agent” is finally the intelligent assistant that AI boosters have been promising (or warning about, depending on your point of view). Indeed, according to reporting from The Information this week, Microsoft’s engineers are scratching their heads and wondering how Cowork appears better at controlling Excel and PowerPoint than Microsoft’s own AI.
Whatever the reason, with its huge base of enterprise users and ownership of the coding mega-platform GitHub, Microsoft stands accused of letting its advantages dwindle. Then again, some of Microsoft’s critics today were Google’s critics yesterday. It wasn’t so long ago that analysts and commentators were lining up to talk about how OpenAI had overtaken the search giant’s in-house AI research shop, DeepMind, and condemned Google’s entire business model to the scrap heap.
