Microsoft (MSFT) Stock Forecast & Price Target

Microsoft's outlook appears positive due to strong expected growth in its revenue, particularly from Copilot deployments, which could contribute approximately $25 billion to the company's top line by FY26. Increased demand for Azure services, evidenced by a significant acceleration in commercial remaining performance obligations (RPO) and commercial bookings, supports this bullish sentiment and highlights the company's capacity constraints as reflective of thriving demand rather than slacking interest. Furthermore, a shift towards increased capital expenditures in FY26 to address immediate capacity needs for short-lived assets such as GPUs and CPUs signals Microsoft’s commitment to meeting the growing demand for its cloud services, thereby reinforcing its robust financial trajectory.

Microsoft's recent financial performance indicates a troubling outlook, characterized by a Q1 EPS decline driven largely by significant expenses related to OpenAI, which negatively impacted profitability and led to a non-GAAP guidance for the first time. Additionally, the company's Azure growth forecast of 37% fell short of investor expectations, resulting in a nearly 3% post-market sell-off, exacerbated by a challenging supply chain environment affecting PC and device sales. Concerns regarding volatile EPS, flat operating margins in FY26, and evolving cybersecurity threats further contribute to an overall pessimistic sentiment regarding future revenue and earnings potential.