Microsoft's AI Bet: Capex Surge, Copilot Growth

0:00Microsoft's stock took a hit after the third quarter earnings drop, even though revenue jumped 18% to $82.9 billion. That's way above expectations, driven by Azure Cloud Growth at 39% and Microsoft 365 co-pilot exploding with over 20. Million paid seats, up 250% year over year. But shares are down 16% year to date, while the S&P 500 is up 5%, high capital spending is the big drag here, with fourth quarter capex set to top $40 billion and next year around $190 billion. CEO Satya Nadella highlighted record co-pilot ads during the call, and remaining performance obligations hit $633 billion. Meanwhile, they're tweaking their OpenAI partnership, no more exclusive model license, and brought in new leadership like Jacob Andreo for co-pilot. Others dumped the stock 4.6% right after the report, trading near $405, blaming those

1:03massive investments, eating into free cash flow. broader market vibes show hyper scalers like Microsoft ramping up spend, with analysts eyeing over 800 billion in total capex for next year. Bank of America bumped their earnings per share forecast, now a $17.38 for 2026, and kept the buy rating. With the $500 price target, they see co-pilots 5 million new users as a win, and shock up 25 billion of the capex hike to pricier parts, not just expansion. All this points to Microsoft doubling down on AI, balancing short-term pressures, like margin squeezes, with long-term hyper scale dominance that could, push shares higher if growth holds steady. That's the story for today. Durham News Today, Driven by AI