Goldman Sachs lifts Microsoft stock price target to $480

On Thursday, Goldman Sachs maintained its optimistic stance on Microsoft Corporation (NASDAQ:MSFT), boosting the tech giant’s price target from $450 to $480, while reiterating a Buy rating on the stock. Currently trading at $395.26, Microsoft has analyst targets ranging from $415 to $650, with a consensus "Strong Buy" recommendation. According to InvestingPro data, the company maintains a "GREAT" overall financial health score of 3.03 out of 5, supported by strong profitability and growth metrics. The adjustment follows Microsoft’s third fiscal quarter of 2025 performance, which surpassed expectations on all major metrics. Analysts at Goldman Sachs expressed increased confidence in Microsoft’s ability to gain market share in artificial intelligence (AI) while continuing to excel in its core business areas.

One of the key drivers behind the raised price target is the acceleration of Azure’s growth, which has now reached a 35% increase at over $70 billion in scale. This growth contributes to Microsoft’s impressive overall revenue of $261.8 billion in the last twelve months, with a 15% year-over-year growth rate. InvestingPro subscribers can access 12 additional key tips about Microsoft’s performance and potential, along with comprehensive financial analysis in the Pro Research Report. The Goldman Sachs analyst highlighted the potential for further improvement in non-AI workloads and the ongoing cloud migrations spurred by the need for AI. Azure AI’s revenue growth is expected to remain high through the fiscal year 2026.

Additionally, Microsoft reaffirmed its capital expenditure (CapEx) guidance for fiscal year 2026, indicating that CapEx growth could align with the long-term expansion of Microsoft Cloud. Despite this, CapEx is anticipated to grow faster than Microsoft Cloud in the short term due to the company’s commitment to long-duration investments. The analyst’s forecast for fiscal year 2026 CapEx remains unchanged at a 21% increase, reflecting Microsoft’s investment in assets to meet the growing demand.

The report also noted the significant uptake of Microsoft’s Copilot, with a tripling in user numbers year-over-year, a record number of customers purchasing additional seats, and over 230,000 organizations utilizing Copilot Studio. As attention turns towards fiscal year 2026, Goldman Sachs believes that Microsoft can achieve a free cash flow increase of 3% and a 17% rise in earnings per share, even with a higher CapEx profile and an anticipated Azure growth rate of 30% or more.

While the outlook remains positive, the analysts acknowledged a balanced view, considering that potential tariffs have largely not been included in the guidance. Microsoft’s strong financial position is evident in its robust gross profit margin of 69.4% and return on equity of 34%. The company’s Altman Z-Score of 10.14 indicates excellent financial stability, though InvestingPro analysis suggests the stock is currently trading slightly above its Fair Value. Investors seeking deeper insights can access the full Pro Research Report, which provides comprehensive analysis of Microsoft’s valuation, growth prospects, and competitive position. The expectation is that as generative AI transitions from infrastructure to platform and application layers, Microsoft is well-positioned to benefit from the shift, potentially leading to a more capital-efficient and higher-margin recurring revenue model, akin to the transition from on-premises to cloud-based services.

In other recent news, Microsoft and Meta Platforms (NASDAQ:META) reported quarterly results that exceeded market expectations, resulting in significant premarket trading gains of 8.1% and 6.9%, respectively. Microsoft’s third-quarter earnings highlighted a 15% year-over-year revenue growth, reaching $70.1 billion, driven by a thriving cloud business with Azure’s revenue growing by 35%. This strong performance prompted Mizuho (NYSE:MFG) Securities to raise Microsoft’s stock target to $500, while Truist Securities maintained a Buy rating with a $600 target. Meta also reported better-than-expected first-quarter results and increased its full-year capital expenditure forecast, focusing on AI investments. Meanwhile, a federal judge ruled that Apple (NASDAQ:AAPL) violated a court order related to its App Store, causing its shares to dip by 1.6%. Guggenheim maintained a Neutral rating on Microsoft, reflecting on the company’s strong position despite previous challenges. The analysts anticipate that Microsoft’s positive results will influence other cloud software companies favorably. These developments underscore the ongoing focus on AI and cloud services as key growth drivers for these tech giants.

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