Microsoft stock slips 5% after earnings, but analysts are hiking targets

Microsoft shares dropped about 5% to $402.37 after a fiscal Q3 earnings beat, as investors focused on a sharp capex ramp that depressed free cash flow despite strong Azure growth. Adjusted EPS of $4.27 on $82.9bn revenue topped FactSet expectations, and Azure revenue rose 40% YoY with guidance of 39–40% for the next quarter (above the ~36.8% estimate). The firm reported quarterly capex of $31.9bn (up 49% YoY), expects next-quarter capex to exceed $40bn and annual spending near $190bn versus Street estimates of $160bn — a driver of near-term sentiment weakness. Wall Street remains constructive: Stifel, BMO and Goldman raised price targets, signaling confidence in long-term monetization even as investors weigh near-term cash-flow pressure. The market impact is a classic trade-off: strong operational momentum supporting higher analyst targets, offset by investor concern over elevated AI/data-center spending and its near-term effect on margins and cash flow.