For 2026, Microsoft (MSFT) has guided for capital expenditure of $190 billion. The big spending on AI infrastructure has translated into investors being cautious. As a result, MSFT stock has declined by 9.83% in the last 52-weeks.
However, the sideways to lower price-action seems like a good buying opportunity. Even as the markets remain cautious, Microsoft’s AI backlog (commercial remaining performance obligation) swelled to $627 billion. This provides clear revenue and cash flow visibility.
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However, analysts have been positive on Microsoft. Recently, Wedbush reiterated its “Outperform” rating for the stock with a price target of $575. This view comes amid Microsoft and OpenAI having renegotiated their revenue-sharing plan. While OpenAI is expected to save $97 billion in projected payments, Microsoft will benefit from being paid sooner. According to Wedbush, the “revised structure” is a “positive for Microsoft and its overall AI strategy.” This view is likely to alleviate market concerns around the deal.
About Microsoft Stock
Headquartered in Redmond, Washington, Microsoft is a technology giant with a market valuation of $3.04 trillion. The company is a provider of software, services, devices, and solutions globally. Microsoft’s business segments include Productivity and Business Process, Intelligent Cloud, and More Personal Computing.
For Q3 FY26, Microsoft reported revenue growth of 18% year-over-year (YOY) to $82.9 billion. For the same period, operating income swelled by 20% to $38.4 billion.
Besides the headline numbers, a key highlight was the company’s AI business annual revenue run rate surpassing $37 billion, which was higher by 123% YOY. This underscores the point that the company’s focus on AI infrastructure and solutions is delivering results.
However, MSFT stock has been relatively weak with a correction of 19.94% in the last six months. A reversal is likely as the big capex starts showing results in terms of growth acceleration.
www.barchart.com Elevated Capex Unlikely to be a Concern
In June 2025, PricewaterhouseCoopers opined that AI adoption is likely to boost global GDP by an additional 15% by 2035. Amazon (AMZN) CEO Andy Jassy recently called AI as "a once-in-a-lifetime opportunity where the current growth is unprecedented and the future growth even bigger."
While capex by the tech giants has been unprecedented, the opportunity is of a bigger scale. Specific to Microsoft, the company reported operating cash flow of $127.5 billion for the first nine months of FY26. The business is a cash flow machine and few years of high capex is unlikely to be a major stress. Further, with the AI business annual revenue run rate surging, there is greater confidence to invest.
At the same time, the company’s Productivity and Business Processes has delivered healthy growth. It also seems increasingly clear, the stories on the death of SaaS are exaggerated. This is likely to support re-rating of MSFT stock.
What Do Analysts Say About MSFT Stock?
Based on 48 analysts with coverage, MSFT stock has a consensus “Strong Buy” rating. While 39 analysts have a “Strong Buy” rating for MSFT stock, three have a “Moderate Buy,” and six have a “Hold” rating.
The mean price target of $554.43 represents potential upside of 35.5% from current levels. Further, the most bullish price target of $680 suggests that MSFT could climb 66.13% from here.
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www.barchart.com Concluding Views
From a valuation perspective, Microsoft stock trades at a forward price-to-earnings ratio of 24.34 times. Valuations seem attractive as the technology giant’s significant capex is likely to translate into healthy growth.
Morgan Stanley recently opined that the big capex by the likes of Amazon, Alphabet (GOOG) (GOOGL) , and Microsoft is already yielding results with revenue “accelerating across the board.” Therefore, an almost 20% correction in MSFT stock in the last six months seems like a good accumulation opportunity.
On the date of publication, Faisal Humayun Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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