saw a slight bid last week as bulls hoped the conflict with Iran was nearing a conclusion. That didn’t stop several analysts from lowering their price targets on the stock.
During the week of April 13-17:
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Piper Sandler dropped its price target to $500 from $600.
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Mizuho dropped its price target to $515 from $620.
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TD Cowen dropped its price target to $500 from $540.
It’s worth noting that in each case, the analysts maintained an Outperform rating on MSFT, and the stock continues to have a consensus rating of Moderate Buy with a price target of $577.58, a gain of over 35%.
MSFT is up almost 2% in the last five days. However, the stock is a far cry from its all-time high and is down over 13% in 2026. Headlines can only take the stock so far. To really move higher, the company will need to deliver a stellar earnings report. But this quarter seems like another case where good may not be good enough.
Microsoft Earnings Preview: Will Growth Be Enough?
Microsoft is scheduled to report earnings on April 29 after the market closes. As of this writing, the whisper number has Microsoft’s adjusted earnings per share (EPS) coming in at $4.13, which is 6 cents higher than the consensus forecast of $4.07 per share.
That would be a 19% year-over-year increase. It would also be a 19% YOY earnings gain through the first three quarters of its 2026 fiscal year. Notably, that’s higher than the projection of 12.3% earnings gains in the next 12 months.
The naysayers could push back and note that even at $4.13, the adjusted EPS would still be down 1 cent from the prior quarter. And considering that Microsoft delivered adjusted EPS of $4.13 in Q1 of FY2026, that would mean there’s been no sequential growth in earnings.
AI Spending Vs. Azure Growth: The Core Debate
Analysts are forecasting less growth as Microsoft continues to spend to build out its AI infrastructure. The company’s record quarterly CapEx spend of $37.5 billion was up 67% YOY. While that’s a big number, Microsoft can afford it. The fair question is for how long? The company’s Azure cloud business is still growing, but the growth missed consensus estimates.
This is where the debate becomes simple, but challenging. In Q2, Azure AI was responsible for about one-third of Azure’s total revenue growth. Microsoft is hoping to double that growth from a $13 billion run rate to about $25 billion by the end of fiscal year 2026 (FY2026).
If it can, it sets up a situation where revenue is scaling as CapEx tapers. That would make Microsoft’s valuation look cheap. Even if it doesn’t, the worst may already be priced into the stock.
The Valuation Debate: Buy the Floor or Fade the Ceiling
Analysts are forecasting 12.3% earnings growth in the next 12 months. That’s an acceleration from the last two quarters, but it is slowing compared to the last few quarters. But as of April 20, MSFT trades at just over 26x earnings. For some context, over the last 3 years, MSFT’s average P/E has been around 34x, and over 5 years, around 32x.
That doesn’t mean MSFT is a screaming Buy, but it does suggest that any frothy premium has been wrung out of the stock. The company also has a current price-to-earnings-to-growth (PEG) ratio of around 1.6, which is attractive for a technology stock, especially one with Microsoft’s history.
This valuation is what made MSFT a buy down around $350 and likely keeps it as a Buy at its current level. But the lower price targets do suggest that the upside may be less than expected.
That’s a distinction for traders more than for buy-and-hold investors. The company’s dividend is safe and well supported by the cash it generates, even if it has to burn some of that cash in the short-term buildout of AI infrastructure.
Trade Setup Vs. Long-Term Investment Case
Given that Microsoft may be oversold, the lower price targets do make the upside a little less attractive. However, that’s only the case when viewing MSFT as a trade. As an investment, there’s little reason to doubt the buy-and-hold case.
There’s always a chance that the company’s AI ambitions won’t lead to the profits that justify a premium price tag, but what’s the upside if they do? And what’s the likelihood that Microsoft’s AI ambitions fall completely flat?
Microsoft has an entrenched user base that offers investors the assurance that it’s not going anywhere. That’s why MSFT is an attractive buy-and-hold, and maybe a bullish trade before earnings.