Microsoft's reported $15 billion decline in capital expenditures (capex) is attributed to an accounting adjustment rather than a reduction in investment plans, analysts say. The company announced on its earnings call that it is extending the estimated useful life of its data centers and office buildings from 15 years to 25 years, effective at the start of fiscal 2027. This change reclassifies future data center leases from finance leases, which count toward reported capex, to operating leases, which do not. CFO Amy Hood stated,
Outside of this useful-life impact, our calendar year 2026 capex investment expectations remain unchanged.
Analyst Ratings and Outlook
Following the earnings report, several analysts reaffirmed their positive outlook on Microsoft. Cantor Fitzgerald analyst Thomas Blakey raised the price target from $502 to $522, maintaining an Overweight rating. He noted that Microsoft's capex guidance remains unchanged and highlighted the company's strong performance in segments like Azure and its AI platform. DA Davidson's Gil Luria reiterated a Buy rating with a price target of $550, calling Microsoft "the adult in the room" and emphasizing its responsible capex guidance. JPMorgan analyst Samik Chatterjee also maintained an Overweight rating with a price target of $550, praising the balance Microsoft is achieving between growth and capital expenditure.
Future Capex Expectations
Despite the accounting reclassification, Microsoft expects its fiscal first-quarter 2027 capex, including finance leases, to exceed $50 billion. The company reported a 69% year-over-year increase in fourth-quarter fiscal 2026 capex and finance leases, reaching $41 billion. Hood confirmed that fiscal 2027 capex will grow year-over-year, driven by strong demand signals across its portfolio. Analysts view this as a validation of Microsoft's AI-led growth strategy, with expectations of positive free cash flow.
Related coverage: Alphabet Raises 2026 CapEx Outlook Amid AI Spending Surge.
The adjustment in Microsoft's capex reporting is likely to influence investor sentiment positively, particularly in the technology sector, as it reflects ongoing confidence in AI infrastructure spending. Analysts' price target increases could lead to upward pressure on MSFT shares. Watch for the upcoming fiscal first-quarter 2027 earnings report, which will provide further insights into Microsoft's capital expenditure trajectory and growth outlook.