Microsoft's AI Growth Hits Infrastructure Walls as EU Line of Sight Sharpens

Microsoft faces Azure capacity strain from GitHub growth, EU gatekeeper probe, and fraud allegations, prompting a $190B AI pivot with Copilot Cowork as stock slides 30%.

The explosion in developer activity on GitHub has laid bare a critical bottleneck at Microsoft: the company's own cloud infrastructure cannot keep pace with demand. With the platform projected to process 14 billion commits in 2026 — up from just one billion last year — the strain is forcing Microsoft to turn to competitors for extra computing muscle. A spokesperson confirmed the firm is pursuing a multi-cloud strategy, tapping third-party providers while continuing to migrate workloads to Azure.

That tactical retreat comes as European regulators train their sights on Azure itself. The European Commission is investigating whether the cloud service qualifies as a "gatekeeper" under the Digital Markets Act, alongside Amazon Web Services. Preliminary findings suggest Azure meets the criteria for tighter oversight, a designation that would impose strict interoperability obligations and ban customer lock-in practices. A final decision is expected by the end of 2026, following several high-profile service outages in the second half of 2025 that disrupted global operations.

The regulatory cloud is not the only one hanging over Redmond. On June 18, the Portnoy Law Firm opened an investigation into possible securities fraud, alleging that Microsoft executives misled investors about the competitiveness of the company's AI portfolio. The complaint centers on two claims: that Microsoft's AI models underperformed rivals in industry benchmarks, and that the company diverted significant Azure capacity to fix flaws in the Copilot chatbot, sapping resources from the cloud division. Those internal shifts, according to the firm, contributed to the weaker-than-expected Azure growth reported in the January 28, 2026 quarterly earnings.

Microsoft's response to these converging pressures is a strategic pivot toward autonomous AI agents. On June 16, the company launched "Copilot Cowork," a new agent system that introduces a usage-based billing model and integrates the "Microsoft Scout" agent. But the infrastructure required to support such services is enormous. Analysts estimate Microsoft's capital expenditures for calendar 2026 will reach approximately $190 billion — a spending pace that far outstrips current revenue from AI subscriptions, raising alarms among investors.

The numbers underscore the challenge. The company's most recent quarterly report, for the period ending March, showed total revenue climbing 18% to nearly $83 billion, with cloud revenue up 29% and Azure alone expanding 40%. Yet those headline figures mask a capacity crunch that has already forced GitHub to temporarily pause new sign-ups for certain Copilot Business customers since late April. Rivals like Amazon have seized the moment, rolling out their own developer-focused AI updates.

At the stock level, the pressure is visible. Shares closed Thursday at 330.85 euros, roughly 30% below the 52-week high of 478.10 euros reached last October. The 50-day moving average of 354.02 euros presents the nearest resistance, while the 52-week low of 309.35 euros sits less than 7% below the current price. The relative strength index has fallen to 37.0 — with some readings as low as 36.3 — placing it near oversold territory. The longer-term moving average of 387.18 euros remains well overhead, underscoring the depth of the year-to-date decline of about 18%.

Management now faces a delicate balancing act: monetize the AI surge without sacrificing margins, while avoiding further regulatory entanglements. Every external cloud contract signed to alleviate GitHub's load chips away at profitability in Microsoft's most important growth segment. The clock is ticking — both from Brussels and from the market.