Share courses on Microsoft (Nasdaq: MSFT) Was down 6% immediately after its financial report from the second quarter of January 29. The software leader delivered revenue and revenue that topped Wall Street expectations, but it was not enough for investors to motivate to invite the share price to new heights.

The main question seems to be valuation. Microsoft has accelerated its investments in recent years to support artificial intelligence (AI). Investors have invited the share price up to a high Price-to certificate (P/E) Multiple of 33, which predicts that expenses to drive strong growth, but the company’s revenue has increased only 10% years during the year over the past three quarters.

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Investors can begin to lose patience waiting for these investments to pay off. Here, therefore, the share can continue to disappoint investors in 2025.

Higher capital expenditure does not translate to higher growth

To its credit is Microsoft in a solid competitive position to take advantage of corporate investment in AI Services. Microsoft’s cloud revenue exceeded $ 40 billion and grew by 21% year over years. AI-related revenues are up to $ 13 billion on an annual basis and up 175% year over years.

The revenue from AI barely moves the needle for a company that generates $ 261 billion in total revenue over all products. In addition, as its relatively low profit level indicates, this small amount indicates additional AI revenue at a large cost.

Data by Ycharts.

Microsoft doubled its Data Center capacity over the past three years. Investment During the calendar 2022, less than $ 25 billion was, but has more than doubled to $ 55 billion over the past 12 months.

Despite this accelerated expenditure curve, Microsoft’s revenue growth from year to year has decreased from over 20% a year ago to only 10%, and this retardation in profit growth comes because investors pay a higher P/E multiple for the shares. Even given long -term estimates, analysts expect revenue to grow at an annual interest rate of 13%, which may not be enough to support the share 33 p/e.

It is understandable that higher expenses will push margins in the short term. But even Microsoft’s income growth has not shown any acceleration over the past five years. Microsoft’s increase of 12% from year to year last quarter is consistent with its historical average.

This asks questions about Microsoft earns the return on capital to motivate these massive expenses increases in technology infrastructure.

The stock is relatively expensive and may fall longer

To be fair, Microsoft invests to meet the demand for AI and cloud services in the long term. But it does not make the share a purchase, especially when there are other top technical companies that invest in AI but also report much higher profit growth.

For example, Meta platforms Reported Q4 profit growth of 50% year over years, and analysts also predict their revenue to grow 17% annually in the coming years. Meta grows revenue faster than Microsoft, while the share’s valuation is slightly cheaper. Investors can buy shares for 29 times revenue.

Microsoft really sees a robust demand for AI, but AI services do not generate enough revenue to affect the company’s total growth rate. Unless Microsoft may speed up revenue or profit growth, inNvestors should not expect the stock to hit new heights at any time soon, and there may even be more disadvantage if the stock corrects to a lower p/e.

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Randi Zuckerberg, a former head of market development and spokeswoman for Facebook and Sister to Meta Platform’s CEO Mark Zuckerberg, is a member of Motley Fool’s board. John Ballard has no position in any of the shares mentioned. Motley Fool has positions in and recommends meta platforms and Microsoft. Motley Fool recommends the following options: Long January 2026 $ 395 calls on Microsoft and short January 2026 $ 405 calls at Microsoft. The varied fool has one disclosure.