Microsoft (MSFT) Stock: Why Analysts Stay Bullish Ahead of Earnings

TLDR

• Microsoft reports Q2 FY26 earnings on January 28 with analysts expecting EPS of $3.91 and revenue of $80.28 billion
• Multiple analysts lowered price targets but maintained Buy ratings, with targets ranging from $600 to $675
• MSFT stock jumped 4.1% Friday after UBS maintained Buy rating despite cutting target to $600
• Analysts expect record quarter-over-quarter RPO increase driven by $250 billion OpenAI and $30 billion Anthropic deals
• Azure growth remains strong with new Fairwater AI data centers in Atlanta and Wisconsin as key catalysts

Microsoft reports its fiscal second-quarter results on January 28. Wall Street is watching closely as the tech giant navigates AI investments and cloud growth.

Microsoft Corporation, MSFT

Analysts expect earnings per share of $3.91, representing 21% year-over-year growth. Revenue estimates sit at $80.28 billion, up 15.3% from last year. The stock has gained about 5% over the past year.

Multiple analysts recently adjusted their outlooks on MSFT. Citi’s Tyler Radke cut his price target to $660 from $690 but kept his Buy rating. He called Microsoft a top mega-cap pick despite mixed signals from reseller surveys.

Radke expects Azure to beat Street expectations in Q2. However, he lowered estimates for non-Azure businesses due to weaker PC forecasts. His reseller survey showed more mixed results than previous quarters.

Mizuho’s Gregg Moskowitz reduced his target to $620 from $640 while maintaining a Buy rating. He adjusted targets across large-cap software stocks as part of his December quarter preview.

Channel checks showed overall strength according to Moskowitz. Public cloud data points looked generally good and AI adoption remained very strong. Some checks indicated a slower-than-usual spending pace though.

Moskowitz noted growing investor concerns about AI disruption. These worries are weighing on software company valuations across the board.

UBS Sees 28% Upside Despite Target Cut

Jefferies analyst Brent Thill kept his $675 price target and Buy rating. He pointed out MSFT stock has pulled back 18% since fiscal Q1 results despite major AI commitments.

The stock’s multiple has contracted 23% as investors rotate into semiconductor stocks. Microsoft disclosed $250 billion in OpenAI commitments and $30 billion with Anthropic.

Thill remains confident in Microsoft’s execution capabilities. The company is ramping up capacity this year with a robust backlog to work through.

UBS analyst Karl Kierstead lowered his target to $600 but maintained a Buy rating. His note triggered a 4.1% stock jump Friday as investors focused on his bullish stance rather than the reduced target.

Kierstead highlighted the Fairwater AI data centers as key catalysts. The Atlanta facility went live in October. The Wisconsin location is set to launch in Q1 2026.

A UBS team visited the Wisconsin site recently. The visit prompted them to raise fiscal Q2 2026 revenue guidance based on the progress they observed.

Record RPO Growth Expected

Thill expects Q2 FY26 remaining performance obligation to show the largest quarter-over-quarter increase ever. The metric grew 51% to $392 billion in Q1 FY26.

The OpenAI deal worth $250 billion will contribute to RPO growth. The Anthropic Azure compute agreements worth $30 billion will also boost the number.

The Intelligent Cloud segment houses Azure. It’s Microsoft’s second-largest business unit with a 42% operating profit margin. This trails the 58% margin in Productivity and Business Processes.

Wall Street maintains a Strong Buy consensus on MSFT. The rating is based on 32 Buy recommendations and two Hold ratings. The average price target of $626.14 suggests 34.4% upside from current levels.

Some analysts worry about software sector valuations. The concern centers on whether AI investments justify current stock prices. Microsoft trades at 32 times earnings with analysts forecasting 14% long-term growth.

Capital spending is pressuring free cash flow. The metric currently sits at 74% of reported net income. This puts Microsoft’s price-to-free cash flow ratio at 43 times.

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