Microsoft Capex Will Be Very High Next Year, RBC's Jaluria Says

Summary

RBC analyst Rishi Jaluria called Microsoft's Q4 results fantastic, highlighting Azure's beat, record Office Copilot user growth, and lighter-than-feared CapEx. He explained Microsoft's deliberate overbuilding strategy, its ability to absorb third-party cloud capacity, and the strength of its AI model positioning through OpenAI IP and multi-model flexibility. He expects very high CapEx growth next year and sees Copilot stickiness improving.

• Azure grew 43% constant currency, exceeding the expected 40%
• Office Copilot added 10 million users in the quarter, double the prior-quarter pace
• Microsoft is intentionally overbuilding capacity, reversing past underinvestment mistakes
• The company can shift third-party cloud deals back in-house, reducing long-term cost
• OpenAI IP rights until 2032 allow custom model building without separate CapEx
• Copilot stickiness is rising; Microsoft is integrating even Anthropic's tools into Office
• Jaluria's Capex estimate for FY27 is $230 billion fully burdened, well above the Street's $190 billion