Microsoft stock at $410 trades below analyst consensus of $560.77 despite AI revenue growing 123% year-over-year and Azure reaccelerating to 40% growth, but capex guidance near $190 billion for calendar 2026 weighs on free cash flow.

Microsoft's AI business hit a $37 billion annual run rate growing 123% year-over-year, while Azure reaccelerated to 40% growth. Cloud revenue reached $54.5 billion last quarter, with commercial backlog at $627 billion, nearly double a year ago.

Capital expenditure rose to $30.88 billion (up 84% year-over-year), with management guiding over $40 billion in Q4 and calendar 2026 capex near $190 billion. Free cash flow declined 3.32% in FY25 despite earnings growth, and gross margin compressed to 68%.

Microsoft 365 Copilot paid seats crossed 20 million (up 250%), with the company posting four straight EPS beats. Management guided Q4 revenue to $86.7 to $87.8 billion. Consensus analyst target is $560.77 with 51 Buys and 3 Holds among 54 analysts covering the stock.