Analysts say Microsofts earnings may be a turning point for the struggling tech stock
Analysts on Wall Street are gaining confidence in Microsoft’s artificial intelligence strategy after the tech giant released its latest quarterly figures. The “Magnificent Seven” stock reported its fiscal fourth-quarter earnings and revenue that beat analyst expectations, sending shares higher in premarket by jumping 9%. Microsoft’s cloud computing platform Azure surpassed $100 billion for the first time in the 2026 fiscal year. Its AI chatbot crossed 30 million paid seats, while the company also got a $3.2 billion gain from its stake in artificial intelligence giant Anthropic. Meanwhile, the company’s free cash flow fell 23% to $19.64 billion, as its capital expenditures totaled $35.8 billion, but that was lower than expectations for over $36 billion, according to FactSet. Analysts on Wall Street generally reacted favorably to the results, with many firms raising their price targets on the stock. “Christmas came a bit early for MSFT shareholders,” wrote Evercore ISI analyst Kirk Materne in a Thursday note. MSFT YTD mountain Microsoft year-to-date. Microsoft shares have struggled in 2026, down 19% while the S & P 500 is up almost 7%, as investors worried about the company’s plans to capitalize on AI and as the broader market worried about how software companies’ business models would potentially be disrupted by the technology. But Bank of America analyst Tal Liani said the latest report shows Microsoft “as increasingly positioning Copilot as the orchestration layer for enterprise AI, enabling access to a broad portfolio of models while continuing to expand its own AI ecosystem.” Even Melius Research — which has one of the few hold ratings on the stock — acknowledged that despite concerns the firm still has with the company’s software-as-a-service business, the results were a strong showing for Microsoft. “While this quarter is not likely to put questions fully to bed,” wrote Raymond James analyst Andrew Marok in a Wednesday note, “execution in the face of mounting doubts should quiet the loudest concerns for the time being.” Stifel: Hold, $450 The firm’s price target, up from $400, indicates a 15% gain from Wednesday’s close. “Looking forward, the company reiterated its FY27 guidance commentary calling for sustained double-digit revenue and operating-income growth on mid-to-high-single-digit OPEX growth (headcount expected to decline). While gross-margin will compress on mix shift, an accounting change extending the useful life of offices and datacenters to 25 years from 15 years will offset part of the decline.” Melius Research: Hold, $465 The firm’s price target, up from $400, represents a 19% rise from Wedneday’s close. “The Azure guide and articulation of Copilot revenue was better than we had expected, period. We also think many will have fun with the free cash flow comparisons among megacaps, although it’s not like ‘positive free cash flow’ is strong or can support major buybacks. We raise our long-term estimates and acknowledge concerns that Copilot would cannibalize upside in Azure are overblown so far. We still have long-term concerns with the SaaS aspects of the business, but this was a strong showing for Redmond.” Bank of America: Buy, $500 “The key takeaway from 2Q results is increasing validation of Microsoft’s AI strategy… Management guided to 1Q27 Azure growth of 45% YoY, above the Street’s 40.6% expectation, driven by continued data center capacity expansion and internal efficiency gains. Paid Copilot seats increased by 10mn QoQ to more than 30mn, with net additions more than doubling sequentially, signaling a shift from pilot programs to broader enterprise deployment.” Barclays: Overweight, $512 The bank’s price target, down from $545, which indicates a 31% gain from Wednesday’s close. “We update our estimates to reflect Q4 performance and management’s commentary around guidance and general business conditions… We maintain our OW rating, but lower our PT to $512 (from $545), based on our CY27E EPS estimate of $21.47 (prior: $21.98) and CY27E P/E multiple of ~24x (prior: ~25x) to better reflect current valuation levels for software peers.” Evercore ISI: Outperform, $528 The firm’s price target, up from $525, implies a 35% gain from Wednesday’s close. “While we expected Azure acceleration to help shift the narrative in 2H CY26, the magnitude of the upside (43% in F4Q and ~45% implied in F1Q) came in ahead of even the most bullish expectations. At the same time, while our cash capex outlook (~$200bn) remains largely unchanged, management’s call for positive FCF in FY27 removes a key overhang around a more draconian capex scenario.” Raymond James: Outperform, $540 “Commentary around major investor questions (the three C’s – capacity, Copilot, and capex) were all encouraging – while Microsoft remains in a capacity deficit, they are squeezing out process improvements and monetizing faster, leading to the Azure beat. Copilot uptake is also strong, reaching 30M seats and helping drive strong early traction in E7 plans. Finally, capex was unchanged aside from a revision to useful life assumptions, demonstrating an increasing ROI given Azure’s acceleration.” Wolfe Research: Outperform, $550 The firm’s price target, up from $525, indicates an almost 41% gain from Wednesday’s close. “MSFT took the gloves off this quarter… Overall, confidence in growth increases, EPS revisions are positive while capex doesn’t really move. Sounds like a recipe for success and we are buyers.” JPMorgan: Overweight, $550 “Not to be underappreciated as well, Microsoft is showing momentum with AI across its apps business, including the doubling net new seat adds for Copilot in F4Q vs. F3Q, in part driving the guidance for M365 Commercial Cloud growth to accelerate through FY27. FQ4 (June-ended) total revenue expanded 18% y/y or 17% CC (vs. consensus 15% y/y and 14% CC) and operating income grew 18% (vs. consensus 14%), helping with modest margin expansion to 45.1% (vs. consensus 44.5%) as operating leverage was the primary driver to offset the gross margin moderation on account of higher Azure mix. Total CapEx (which includes finance leases) tracked to $41 bn, pleasantly surprising investors by coming in modestly below consensus of $42 bn.” Truist: Buy, $575 “Profitability also remained solid in the quarter, even as the company invests heavily in building out its AI infrastructure. The company reported a 4Q operating margin of 45.1%, higher than our estimate of 44.0%. Free cash flow was meaningfully below our estimate in the quarter ($28.1 billion), coming in at $19.6 billion, while capital expenditures including finance leases were above our estimate of $40 billion, coming in at $41 billion.” Citi: Buy, $600 The bank’s price target, up from $575, represents a 53% gain from Wednesday’s close. “Microsoft’s strong 4Q26 results offered a solid rebuttal to the bear case. A robust and broad-based beat/raise across both top and bottom lines featured accelerations in two of Microsoft’s most consequential franchises… As the AI industry grapples with rapidly evolving questions around open source/smaller models, Microsoft increasingly looks better positioned with a focus on model choice.” Morgan Stanley: Overweight, $600 “Microsoft’s F4Q26 results move the key elements of our investment thesis from expectation to evidence… We continue to see a path to sustainable high-teens revenue growth and greater than 20% earnings growth, making 17.7x FY28 GAAP EPS too inexpensive; applying a conservative 1.2x PEG and 25x P/E supports our $600 price target and approximately 40% upside.” Goldman Sachs: Buy, $640 The bank’s price target, up from $610, indicates a nearly 64% gain from Wednesday’s close. “We view this quarter as a meaningful step in reversing the stock’s multi-quarter period of underperformance, as Microsoft delivered tangible proof points across several key investor debates: Azure acceleration against ongoing capacity constraints and 1P mix allocation, improving AI unit economics with stable cloud margins, and increasing evidence of Copilot monetization.” Wells Fargo: Overweight, $650 The bank’s price target, up from $625, represents a 66% gain from Wednesday’s close. “Now with a cleaner setup into FY27, we think MSFT has room to meaningfully re-rate given clearer response to ROIC questions, strong Azure upside & Copilot-led M365 Comm’l cloud accel through FY27.”
