By Nate Wolf
Wall Street expects another strong quarter from Microsoft when the technology behemoth reports earnings next Wednesday. But at least a couple firms are backing off their most optimistic predictions for the stock.
Analysts at Cantor Fitzgerald reiterated an Overweight rating for Microsoft shares in a research note Thursday, but slashed their price target to $590 from $639. UBS joined them, cutting its target to $600 from $650 while maintaining a Buy rating.
Microsoft stock rose 1.5% to $457.70 on Friday.
The new price targets are more a reflection of general investor sentiment than expectations for the company's Jan. 28 earnings print. Valuations across the software space are creeping down, both UBS and Cantor Fitzgerald pointed out. Microsoft stock itself has slumped 6.7% so far in 2026 as of Thursday's close.
Azure, the company's artificial-intelligence and cloud-computing arm, will be the key focus for investors next Wednesday. Microsoft guided for 37% revenue growth for Azure in its fiscal second quarter, a deceleration from 40% growth the previous quarter. Cantor Fitzgerald sees potential upside to that forecast and expects the company to beat consensus expectations for overall revenue.
"Our checks came in positively for AI/Azure demand and Copilot adoption as customers are becoming increasingly focused on realizing the benefits of AI solutions with partners seeing larger expansion deals within their larger customers," wrote analyst Thomas Blakey.
But stock price multiples are compressing in software, Blakey added, and Microsoft isn't immune to those pressures. Cantor Fitzgerald values the stock at 29 times expected earnings for the calendar year, which is a discount to its average over the last year.
UBS had a similar take. The firm raised its estimates for Azure growth and thinks Wall Street's expectations for the company's capital expenditures in 2027 -- a worry for some -- are too high. Microsoft deserves a premium relative to the industry, the firm said, but that still means cutting its price target.
"Given the evident de-rating across the software sector, we're trimming our PT from $650 to $600," analyst Karl Keirstead wrote.
Others disagree. Morgan Stanley reiterated an Overweight rating and a $650 price target in an earnings preview Friday.
If the company can consistently beat earnings estimates and raise guidance, those results should flow through to Microsoft's valuation, Morgan Stanley suggested. At its current valuation, the firm added, Microsoft stock doesn't reflect the company's long-term growth profile.
Write to Nate Wolf at nate.wolf@barrons.com
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(END) Dow Jones Newswires
January 23, 2026 10:47 ET (15:47 GMT)
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