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On Thursday, Goldman Sachs analyst Kash Rangan revised the price target for Microsoft shares (NASDAQ:MSFT), reducing it to $450 from the previous $500, while maintaining a Buy rating on the stock. Currently trading at $374.39, Microsoft’s stock sits within a broader analyst target range of $415 to $650. The adjustment follows a period of market evaluation and despite recent uncertainties in the macroeconomic environment, the firm’s outlook for Microsoft remains positive. According to InvestingPro data, Microsoft maintains strong financial health with an overall score of "GOOD," supported by exceptional profitability metrics.
Rangan reiterated the Buy rating but adjusted the price target to reflect current market multiples. The analyst’s expectations for Microsoft include an 11% revenue growth, which aligns with the consensus, and a 31%/32% growth in USD/CC for Azure, Microsoft’s cloud computing service, slightly above the consensus of 30%/31%. Earnings per share (EPS) are also anticipated to be $3.23, marginally higher than the consensus estimate of $3.21. This growth trajectory builds on Microsoft’s impressive track record, with revenue growing at 15% over the last twelve months to $261.8 billion, while maintaining a robust gross profit margin of 69.4%.
The analysis acknowledges potential variability in performance across Microsoft’s three business units due to customers managing through macro volatility. Particular attention is given to Azure’s performance and the contribution of artificial intelligence (AI) to its growth. Rangan predicts AI will continue to advance as capacity increases and general AI applications become more integrated at the application level. Although there is some concern about non-AI workloads, the analyst believes any weakness is addressable in the upcoming quarters.
Additionally, Rangan anticipates Microsoft’s capital expenditure (CapEx) to grow by 20% in the fiscal year 2026. This projection is made even as there are reports suggesting adjustments or cancellations in leases. The analyst expects Microsoft to delay providing further details on CapEx growth until the fourth fiscal quarter of 2025.
Looking forward to fiscal year 2026, Rangan remains optimistic about Microsoft’s revenue and earnings potential. The anticipated earnings growth is expected to be 17%, an increase from the 10% in fiscal year 2025, driven by the higher margin AI inference phase and a decrease in capital intensity. The revenue-sharing agreement between Microsoft and OpenAI is highlighted as a factor providing strong visibility into the company’s AI revenue for fiscal year 2026. As general AI transitions from infrastructure to platform and application layers, Microsoft is seen as well-positioned to benefit from this shift. With a stellar track record of 19 consecutive years of dividend increases and strong returns over the past decade, Microsoft continues to demonstrate its market leadership. For deeper insights into Microsoft’s growth trajectory and comprehensive financial analysis, explore the detailed Pro Research Report available on InvestingPro, which covers this and 1,400+ other top US stocks.
In other recent news, Tesla (NASDAQ:TSLA) is preparing to release its first-quarter earnings, which has piqued investor interest amid questions about the company’s ability to meet its annual sales targets. Meanwhile, Apple shares (NASDAQ:AAPL) saw a notable premarket increase following President Trump’s comments suggesting a potential reduction in China tariffs, which could positively impact the company’s supply chain. The Magnificent Seven stocks, including Tesla, Nvidia (NASDAQ:NVDA), Meta (NASDAQ:META), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and Microsoft, have experienced fluctuating premarket trading, reflecting broader market tensions linked to U.S.-China trade discussions.
OpenAI has announced a strategic partnership with The Washington Post to integrate its content into ChatGPT, aiming to provide users with access to high-quality news. Additionally, OpenAI CEO Sam Altman revealed that the company has doubled the rate limits for ChatGPT Plus subscribers to ensure fair resource allocation and enhance service quality. The recent collaboration with The Washington Post is part of OpenAI’s broader initiative to work with global news publishers, enhancing the reach of timely and trustworthy information.
Analysts have been closely monitoring these developments, with firms like Bloomberg noting the significant year-to-date performance of the Magnificent Seven index. These recent updates highlight ongoing shifts in the tech and news sectors, providing investors with critical insights into market dynamics.
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