Microsoft Corporation (MSFT) shares continued their upward momentum on Thursday, rising 0.94% to build on a nearly 5% surge from the prior session. The advance came even as broader U.S. equity markets showed signs of weakness, with the S&P 500 and Nasdaq Composite hovering near flat and the Dow Jones Industrial Average slipping 38 points, or 0.1%.
The recent rally has been partly fueled by optimism from KeyBanc, which reiterated its Overweight rating on Microsoft with a $600 price target, reflecting confidence in the company's cloud computing and artificial intelligence positioning. However, as the April 29 earnings report approaches, a growing number of analysts are tempering their expectations.
Analyst Caution Ahead of Q3 Earnings
TD Cowen lowered its price target on Microsoft to $540 from $610 while maintaining a Buy rating. The firm cited limited near-term upside for Azure growth, attributing the constraint to GPU capacity allocation. According to TD Cowen, a significant portion of computing capacity is being directed toward internal research and development, particularly for advanced AI model development, which is expected to keep Azure growth steady rather than accelerating.
The firm also noted that rising capital expenditures, combined with stable cloud growth, could keep Microsoft's stock trading within a range in the near term. However, it pointed to potential upside if the narrative around Microsoft's Copilot AI tools improves.
Similarly, Baird analyst William Power lowered his price target to $500 from $540 while maintaining a Buy rating. Power cited cautious sentiment around Microsoft's core software business and increasing competition in AI, particularly in the Copilot segment, where rivals continue to advance rapidly. He also noted that many investors are waiting for a clear acceleration in Azure growth, which may not materialize in the upcoming quarter.
Focus on Copilot and Cloud Momentum
Investor attention is increasingly centered on Microsoft's AI strategy, particularly the adoption of its Copilot tools and the trajectory of its Azure cloud platform. TD Cowen indicated that while Azure growth may be capped in the near term, the earnings report could shift focus toward AI-driven opportunities and capital spending trends.
Power maintained a constructive outlook on Microsoft's fundamentals heading into earnings, expecting strong Azure performance, continued adoption of Copilot, and overall earnings growth to help address investor concerns. According to Power, Microsoft remains attractive at current levels, even as the market seeks clearer evidence of sustained growth.
For context, Microsoft's AI and cloud strategy is part of a broader industry trend. Competitors like Nvidia have also seen analyst support for their AI leadership, while Cerebras has surged on its own AI chip strategy. Meanwhile, the broader market has been influenced by geopolitical developments, such as the Strait of Hormuz reopening, which sparked a broad rally.
Microsoft's recent share price gains highlight ongoing confidence in its long-term AI and cloud strategy. However, mixed analyst views underscore the importance of execution, particularly in scaling AI offerings and sustaining cloud momentum.
This article is for informational purposes only and does not constitute financial advice.
