Microsoft's Capex Surge Threatens AI Thesis

Microsoft's capex surged by 79.62% to $115.948 billion in fiscal 2026, but free cash flow fell 6.46%, raising concerns about the company's ability to sustain its AI strategy.

Azure grew 43% last quarter, and management guided a 45% growth rate for fiscal Q1 in constant currency. The commercial backlog rose 84% to $678 billion.

Copilot, Microsoft's business AI tool, passed 30 million paid seats with net increases more than doubling sequentially, driven by usage-based pricing on top of per-seat fees.

Analysts are largely bullish on the stock, with 14 Strong Buy ratings and 38 Buys. Our model rates the stock a buy with high confidence, targeting $611.28 in the next 12 months.