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Microsoft Earnings Look Strong, But Investors Focus on Risks

Written by Chris Markoch

Earnings reports are like progress reports in the sense that they require investors to digest facts and make educated guesses about the company’s future prospects. In the case of Microsoft Corp. (NASDAQ: MSFT), investors are more concerned with future risks than with solid results in the present.

The highlights from the company’s Q3 2026 earnings report start with a top and bottom-line beat. Microsoft reported 40% growth in its Azure cloud computing segment. That beat the high end of its guidance. The company’s AI business is now generating $37 billion annually, a 123% year-over-year (YOY) increase.

The company also reported that Copilot passed 20 million paid seats, up from 15 million in the prior quarter. That still represents a small fraction of the company’s user base, but the sizable beat shows that momentum is on Microsoft’s side for a platform that’s ancillary to its core business.

But MSFT fell about 5% the day after earnings. Investors are focusing on two key issues: The company’s capital expenditures, and its relationship with OpenAI.

The Basics of Supply and Demand Are Raising CapEx Plans

Microsoft announced that capital expenditures in its current quarter would exceed $40 billion, bringing the company’s full-year total to $190 billion. Chief executive officer Satya Nadella attributed about $25 billion (over 60%) of the quarterly total to higher component pricing for GPU and CPU hardware.

Putting aside what that has meant for a company like Intel (NASDAQ: INTC) and what it likely means for chipmaker earnings such as NVIDIA (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD), the increased spending is being driven by the basics of supply and demand.

That’s a cost of doing business, but as Microsoft’s $37 billion in AI revenue shows, it’s a cost that is starting to deliver a return.

A “Cloud” Over the OpenAI Relationship

In its Q2 2026 earnings report, released in January, Microsoft reported a commercial backlog of $625 billion, a 110% YOY increase. In the most recent quarter, the company’s remaining performance obligation (RPO), which is the closest proxy for backlog, came in at $627 billion. That’s still 99% YOY growth, but it means the sequential gain was nearly flat.

It’s also where context matters. About 45% of the backlog stems from the company’s relationship with OpenAI, including its $250 billion Azure commitment from October 2025.

However, in February, OpenAI cut its compute spending budget for the coming years by more than 50% from $1.4 trillion to $600 billion. That is leading some investors to wonder if Microsoft’s backlog is as solid as it sounds.

But the recent restructured agreement between Microsoft and OpenAI should dispel those ideas. Under the new terms, OpenAI products will still be prioritized for release on Azure, and Microsoft will continue to be OpenAI’s primary cloud provider.

That means that while Microsoft’s share of OpenAI’s business will be less than 100%, the existing payment obligations to Microsoft will continue. In fact, the new deal helps Microsoft reduce its cash outflows while continuing to receive cash inflows and reducing its legal risks.

Microsoft Is Still an Azure Story

Stripping out OpenAI entirely, Microsoft’s underlying RPO still grew 26%. That would be in line with historical norms and a sign that Microsoft’s core commercial business is compounding steadily on its own.

More importantly, Azure growth re-accelerated to 40% this quarter after slipping to 38% in Q2, directly contradicting the bear thesis that Azure is entering a period of structural deceleration. Furthermore, it suggests the capacity constraints that weighed on Q2 are easing, and that real enterprise demand, not just OpenAI commitments, is absorbing Microsoft’s cloud buildout.

Psychology Is Winning Over Fundamentals

There was nothing wrong with Microsoft’s earnings report. A slightly lower Q4 revenue forecast and an equally slight slip on operating margin don’t explain a drop of over 5% in MSFT the day after earnings.

This is about the presumption that many things that can go wrong will go wrong. That includes OpenAI revenue drying up, which would lead to slowing Azure growth, which could call the entire data center buildout into question. It would also leave Microsoft without a significant return for the cash that’s coming off its balance sheet.

However, all of that is based on the persistent belief that an AI bubble is real, even when real earnings results do not support that conclusion.

But should you buy MSFT at this level? To answer that, investors have to deal with the current state of the stock as it relates to the company’s earnings.

Trading at around 24x forward earnings and 10x sales, MSFT is hardly expensive compared to its own history and the premium normally afforded to blue-chip technology stocks. That will be particularly true if the projected earnings growth estimates are too low.

Analysts are maintaining their bullish rating on Microsoft, but price targets moved lower the day after earnings. That said, the consensus price target of $555.95 still suggests 37% upside for MSFT. That hardly puts MSFT on the clearance rack, but it presents an opportunity for solid, long-term growth.

Since hitting a 52-week low at the end of March, the stock has made a nice rally, and nothing in the new price targets suggests a return to recent lows is warranted. 

That makes this a good entry point on an anticipated recovery in the coming weeks. READ THIS STORY ONLINE

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Is This Pre-IPO AI Robotics Company the Next Big Defense Play?

Written by Bridget Bennett

The drones are already in the field. They’re flying into earthquake rubble, operating in contested airspace across active conflict zones, and patrolling sites where putting a human being would mean putting that person at risk. The technology driving them isn’t a prototype—it’s a deployed, battle-tested AI operating system. XTEND CEO Aviv Shapira calls it “AI at the speed of flight,” and with a planned $1.5 billion Nasdaq listing on the horizon, the rest of the market is starting to pay attention.

An Operating System, Not Just a Drone Company

The most important thing to understand about XTEND is what it actually sells. It’s not a drone manufacturer competing in what Shapira calls “a race to the bottom” on hardware specs. It’s a software company, specifically, an AI operating system that plugs into drones and robots made by other manufacturers and makes them dramatically smarter and easier to operate.

The origin story matters here. XTEND started in competitive drone racing, where Shapira’s team figured out that the hardest part of flying a drone at 100 miles per hour through an obstacle course wasn’t the hardware—it was the training time. So they built software that collapsed months of FPV training into about three minutes. The insight that followed was straightforward: if you could make drones that easy to fly for sport, you could make them that easy to deploy in places where lives were on the line.

That pivot from gaming to defense mirrors a trajectory investors have seen before. NVIDIA (NASDAQ: NVDA)didn’t set out to power large language models, it set out to render video games. The parallel isn’t lost on Shapira, and it shouldn’t be lost on investors either.

5 Levels of Autonomy and a Timeline That’s Moving Fast

XTEND has mapped out five levels of drone autonomy, and the company says it’s already operating at levels two and three at scale, with roughly 10,000 systems deployed across more than 32 countries.

Level one is traditional manual control: one operator, one drone, hands on a controller. Level two introduces AI assistance, where the drone handles the how while the operator handles the what. Level three, which XTEND calls task autonomy, removes the operator from the field entirely. A soldier or security team 2,000 miles away taps a window on a screen and the drone enters the building. They say “scan for survivors” and the drone runs the search. No manual flight required.

Level four, what Shapira calls AI pilots, is where one operator directs a swarm of hundreds of drones on a complex mission with a single prompt. Level five, still two to three years out, would have AI handle mission planning and orchestration end to end.

The Turkey earthquake deployment is the clearest illustration of what this looks like in the real world. XTEND sent indoor drones, operating without GPS or consistent communication, into collapsed buildings to search for heat signatures of survivors. The human team didn’t fly the drones through rubble. They told the drones what to find.

The Partnership Roster

The company’s software-first model has made it a natural integration partner for hardware names investors may already follow.

Lockheed Martin (NYSE: LMT) is co-developing a unified control system with XTEND, and the collaboration has deepened significantly.

In late 2025, Lockheed’s Skunk Works division integrated XTEND’s XOS operating system into its MDCX autonomy platform, enabling a single operator to command multiple classes of unmanned systems simultaneously in joint all-domain command and control scenarios. The companies also demonstrated a “marsupial” mission, where a large mother drone deploys and controls a smaller drone on target.

Ondas Holdings (NASDAQ: ONDS) is another active partner, with XTEND’s software running on Ondas hardware to build out aerial defense systems capable of detecting and intercepting hostile UAVs, a use case that’s moved from theoretical to urgent given recent conflict zones.

Unusual Machines (NYSE American: UMAC), based in Orlando, supplies U.S.-made components—motors, batteries, flight controllers—that go into XTEND’s drone production out of its Tampa manufacturing facility.

Red Cat Holdings (NASDAQ: RCAT) is listed among competitive peers in the drone space, though the lines between competition and collaboration in this ecosystem are notably blurry. Boston Dynamics is also using XTEND’s software on its platforms, extending the company’s footprint into ground robotics alongside aerial systems.

Government Contracts and Proven Demand

The partnership roster is notable, but the contract wins are where investor attention should focus. In December 2024, XTEND secured an $8.8 million DoD contract through the Irregular Warfare Technical Support Directorate to deliver its Precision Strike Indoor and Outdoor drone system, the first DoD-approved indoor/outdoor flying loitering munition platform of its kind. Then in November 2025, the company won an additional multi-million-dollar contract from the Office of the Assistant Secretary of War for Special Operations to develop and deliver next-generation AI-enabled one-way attack drone kits.

Active users of XTEND’s systems now include the U.S. Department of Defense, SOCOM, the Israel Defense Forces, Singapore, and allied European defense forces—with production scaling out of the company’s Tampa headquarters, which opened in July 2025 alongside a $30 million extension to a $70 million Series B round.

The Merger and the Path to Public Markets

XTEND is currently private, but a merger with JFB Construction Holdings (NASDAQ: JFB) is in process.

The all-stock deal is valued at $1.5 billion, with the combined company to be renamed XTEND AI Robotics and expected to trade on the Nasdaq under the ticker XTND. The transaction is expected to close by mid-2026, pending regulatory approvals and S-4 effectiveness.

Under the deal’s terms, current XTEND shareholders would own approximately 70% of the combined company, with JFB shareholders retaining roughly 30%. The merger has been approved unanimously by both boards.

What to Watch

The S-4 filing will be the first public look at XTEND’s financials and business structure, a significant data point for anyone tracking this space. The company reports a $500 million pipeline and $71 million in backlog, with $152 million in investor commitments and $42 million already funded.

The upside case is that an AI operating system designed for drones and robots sits in a structurally different position than the hardware makers it partners with. If autonomy scales the way Shapira describes, the software layer may be the most defensible part of the stack. The risk is execution: international expansion, a pending merger, active government contracts, and a race against well-funded competitors—all at the same time.

Stay focused on that S-4, because that’s where the real picture of this company starts to come into view. READ THIS STORY ONLINE

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MongoDB Could Be Setting Up for a Sharp Earnings Rebound

Written by Thomas Hughes

The market is mispricing MongoDB (NASDAQ: MDB), fixating on tepid near-term guidance and the slow acceleration of AI deployment rather than the long-term opportunity. MongoDB’s Atlas platform is a winner in real-world AI situations involving profitable scale.

The document-style architecture enables semantic, vector searches unlike any other, eliminating the need for additional infrastructure in most use cases, reducing production costs for AI applications at scale, and, most importantly, ranks highly among end users. Its unified approach alleviates time-consuming managerial tasks, enabling more time for development.

MongoDB is regularly recognized for its ease of use and speed of deployment. Hyperscalers, including Amazon and Alphabet, have awarded numerous Partner of the Year awards, and more are sure to come. The critical takeaway for investors is that mass adoption of AI is in its earliest phases and will take time to gain momentum. While small today, AI applications are expected to grow at a 25% compound annual growth rate for the foreseeable future, quadrupling in size by early in the next decade.

Fears of AI disruption are impacting the stock price now, but will fade over time. Regardless of whether AI disrupts software industries, it relies on data, and MongoDB shines in that area. In the end, it is unlikely that AI modelers will disrupt specific software industries; more likely, SaaS stocks will incorporate AI into their architectures and drive results for themselves and their clients.

MongoDB Accelerated in 2025, Guides for the Same in 2026

MongoDB’s bearish 2026 price actionwas triggered by AI disruption fears and accelerated by its Q4 2025 results, leading the market to overreact. The Q4 report, released in early March, included sequential and year-over-year acceleration, underpinned by the Atlas platform; it was the guidance that the market didn’t like.

The company forecast Q1 to be weaker than expected, but offset it with a robust full-year outlook. The critical detail is that revenue and profitability growth are expected to decelerate through year’s end, but less than analysts had forecasted, and the guide is likely to be cautious. Results and news from across the AI ecosystem suggest activity is increasing across the board.

The visible catalyst for MDB share prices is the upcoming earnings release, scheduled for late May. The bulk of analysts lowered their targets following the Q4 guidance update, setting the bar low for this company to beat. As it stands, the trend suggests results will fall at the low end of the company’s target range, possibly missing guidance altogether. This sets the stage for significant outperformance and improved guidance. In this scenario, MDB’s share price could rise from the bottom of its trading range to the top very quickly, more than 100% upside for this market.

Analysts and Institutions Show High Conviction in MDB’s Future

The analysts’ response to MDB’s outlook was mixed, and impacted the price action; however, it provides more evidence that the market overreacted to Software-as-a-Service (SaaS) fears. While many price targets were reduced, several analysts issued rating upgrades and price target increases to offset them. The takeaway is that 36 analysts show high conviction in the Moderate Buy rating, as it carries a 72% Buy-side bias, and the consensus price target forecasts a 40% upside as of late April. Assuming good news in the upcoming release, the price target trends are likely to strengthen.

Institutional activity plays into MDB’s stock price volatility. The group owns a little more than 90% of the stock price and dictates its direction with their buying and selling. Selling in Q1 2026 helped cap the MDB market at the top of a trading range; however, the longer-term data shows they bought on balance over the trailing 12 months and ramped activity in early Q2 as price action declined.

The impact is that institutions have limited upside amid SaaS disruption fears, but they and analysts are likely buyers given the depressed share price. They also limit downside risk, providing support at the low end of the range. The question is whether they will remove the price ceiling in the upcoming quarters as strengths are revealed. The primary catalysts will be Atlas adoption and the integration of active AI features.

Risks include competition, despite MDB’s moat from its document-based data storage format, profitability, and volatility. The stock is in a discovery phase, with fears often outweighing reality, leading to outsized price movements. These are likely to persist until concrete evidence that MDB’s future in the AI ecosystem is assured. Profitability is another factor influencing the price action, with GAAP operating losses expected to continue for some time. READ THIS STORY ONLINE

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