Microsoft Corp. (NASDAQ: MSFT) stock fell 2% after-hours following third-quarter earnings, as investors reacted to higher-than-expected AI expenditures. Despite concerns, Microsoft reported a 33% increase in free cash flow to $25.7 billion. Revenue of $77.7 billion exceeded expectations, with EPS at $3.72 and Cloud revenue at $49.1 billion.

Microsoft’s AI growth comes at a cost, with capital expenditures on AI infrastructure rising to $34.9 billion. While Microsoft is increasing AI capacity and data center footprint, the company expects elevated CapEx spending into 2026, potentially impacting Azure’s growth in the short term.

Analysts continue to be bullish on MSFT stock, with a consensus price target of around $631, representing an 18% increase. Despite a post-earnings dip, analysts view this as a potential buying opportunity, given the strong results and long-term growth prospects. The stock is trading at a forward P/E ratio of 41x.

Read more at Nasdaq: Why Microsoft’s Post-Earnings Dip Is a Buy-the-Pause Moment