$650 in 2027: Can Microsoft Overcome Capex Fatigue and Reach This Target?
Microsoft's (NASDAQ:MSFT) stock is essentially flat on the year despite Azure crossing $100 billion in annual revenue and Microsoft 365 Copilot surpassing 30 million paid seats. The company's shares closed at $480.35, down 0.23% YTD and 6.91% over the past year.
The disconnect between Microsoft's strong fundamentals and its stock price is attributed to capex fatigue, with the company committing $115.95 billion in FY2026 capital expenditures, up 79.62% year over year. Management guided FY27 capex to roughly $175 billion after a lease-classification change, which has led to free cash flow falling 6.46%. Traders have taken notice, with shares down 5.08% in the past week.
To reach $650 by August 2027, Microsoft needs Azure growth above 40%, on-schedule RPO conversion, and Copilot consumption billing lifting EPS above $19.96. Analysts are anchored on the current capex cycle and underweighting the $678 billion commercial RPO backlog, which represents contracted revenue already on Microsoft's books.