This paper describes the findings of detailed simulations performed to investigate the impact of seal teeth cavity leakage flow on the aerodynamic and thermal performance of a three-stage supercritical CO2 axial compressor. The study compares a shrouded stator configuration (with cavities) to a cantilevered stator configuration (without cavities) to highlight their differences. High-fidelity computational fluid dynamics simulations were performed using non-linear harmonic (NLH) and mixing plane assumptions, considering various possible rotor/stator interface configurations for mixing plane calculations. The key performance parameters for each case were compared, and the best-performing configuration selected for further analysis. The individual stage performance parameters are also examined and compared between the cantilevered and shrouded configurations. It was observed that in the shrouded case, the leakage flow enters the cavity downstream of the stator trailing edge and gets entrained into the primary flow upstream of the stator, leading to boundary layer changes at the hub and degradation of stator and downstream rotor performance. Vortical flow structures were also observed in the stator wells, which tended to change the flow angles around the region, thereby affecting mixing and velocity distribution, resulting in a slight deterioration of compressor performance. Additionally, the study examines windage heating due to shear work from rotating walls, including the seal teeth surface. The amount of shear work done on the leakage flow and the corresponding rise in fluid temperature were quantified, tabulated, and further compared with a simple analytical model, showing good agreement between them and, hence, validating the numerical approach used.