Microsoft’s Dual Strategy: Billions in Investment and Price Hikes

While Wall Street has been preoccupied with concerns over the soaring costs of artificial intelligence, Microsoft's leadership is providing a clear blueprint for funding this technological arms race. The software behemoth is executing a two-pronged approach, combining its largest-ever Asian investment with significant price increases for its core productivity software.

Despite a challenging period for its share price, which currently trades approximately 10% below its 52-week high and has lagged behind other major tech constituents, analyst sentiment remains bullish. Barclays and Jefferies analysts recently reaffirmed their buy ratings, with price targets as high as $675. Their confidence is underpinned by Microsoft's formidable financial position. The company generated nearly $35 billion in capital expenditures in the first quarter alone, yet it maintains robust financial flexibility with roughly $78 billion in free cash flow. This war chest is seen as sufficient to fund its ambitious growth plans without straining the balance sheet, even with increased expenditures projected for fiscal 2026. Investors are advised, however, to monitor ongoing regulatory scrutiny from antitrust authorities in both the U.S. and the EU.

A Price Increase to Fuel the AI Engine

On the revenue side, Microsoft is taking decisive action. Effective July 1, 2026, the company will raise prices for commercial Office 365 subscriptions by up to 33%. This marks the first price adjustment for these products in three years. The justification centers on the addition of more than 1,100 new features and the deep integration of AI capabilities like Copilot. This move signals a strategic shift: AI is transitioning from a premium add-on to an essential, standard component of the software suite. Given the entrenched nature of Microsoft's products in global business workflows, the risk of significant customer attrition to competitors is considered low.

Should investors sell immediately? Or is it worth buying Microsoft?

The Battle for Asia's Digital Future Intensifies

The centerpiece of Microsoft's spending offensive is a monumental $17.5 billion commitment to expand cloud and AI infrastructure in India over the next four years. This investment dramatically overshadows a $3 billion pledge made just in January 2025. The capital will be directed toward massively scaling hyperscale cloud capacity and embedding AI services into government platforms. Furthermore, the initiative includes plans to provide AI skills training to 20 million people in India.

This aggressive push is a direct response to fierce competition in one of the world's fastest-growing digital economies. Microsoft is not alone in recognizing the opportunity; rivals Google and Amazon are also deploying substantial capital—$15 billion and $8 billion, respectively—into the subcontinent to secure their market positions.