Microsoft: Two Signals Just Flashed Green, And The AI CapEx Fear Is Breaking

Microsoft’s FQ4 showed that the AI CapEx story is beginning to look more like future operating leverage than endless margin pressure. Intelligent Cloud revenue moved closer to catching up with COGS growth, while CapEx productivity held up better than expected. Incremental gross margin remains the missing piece, meaning the full cloud margin inflection has not arrived yet. With two of the three signals improving and valuation still below historical levels, I believe the re-rating has further room to run.