Microsoft has just reported its strongest results in its modern history. Revenue in the third fiscal quarter of 2026 reached $82.9 billion, Azure grew by 40%, and the AI business exceeded an annual run rate of $37 billion. Nevertheless, the stock has lost approximately 15% this year and is trading at a discount of nearly 40% below the average analyst price target.

Microsoft announced $190 billion in capital expenditures (capex) for 2026, with $25 billion of that attributable to rising component costs alone. That is 61% more than the previous year and a figure that exceeded the analyst consensus by $35 billion. The market is thus faced with a simple yet difficult question: Is Microsoft building the world’s largest and most profitable AI infrastructure, or is it paying an astronomical entry fee into a race whose outcome no one yet knows?

Key Points of the Analysis

• Revenue in the third fiscal quarter of 2026 reached $82.9 billion, representing year-over-year growth of 18%. Operating income…