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Investing.com - Cantor Fitzgerald has reiterated its Overweight rating and $639.00 price target on Microsoft (NASDAQ:MSFT) following the company’s F1Q26 earnings report that exceeded expectations across most divisions. Microsoft, currently trading at $526.56 and with a market cap of $3.92 trillion, is considered overvalued according to InvestingPro Fair Value assessments.
Microsoft’s Azure cloud service grew 39% in constant currency, beating Street expectations by 2%, with guidance for 37% growth in the upcoming quarter. The company noted that Azure’s growth is currently constrained by supply limitations rather than demand. This strong performance aligns with Microsoft’s overall revenue growth of 14.93% over the last twelve months, reaching $281.72 billion.
Microsoft now expects to reach demand/supply equilibrium in June 2026, which represents a six-month delay from its previous forecast. The company cited accelerating demand as the reason for this adjustment and the need for significantly higher capital expenditures. Despite trading at a high P/E ratio of 38.66, InvestingPro data shows Microsoft maintains an excellent financial health score of 3.12 (rated as "GREAT").
Capital expenditure is now projected to grow faster than the 58% increase seen in fiscal 2025, as Microsoft continues to build out its AI infrastructure. The company highlighted its "fungible fleet" that can be utilized across the AI lifecycle and continuously modernized.
Microsoft also noted software-driven optimizations that have increased token throughput for leading large language models by over 30% per GPU, demonstrating efficiency improvements in its AI hardware utilization.
In other recent news, Microsoft has reported strong first-quarter fiscal 2026 earnings, surpassing both top and bottom-line expectations. The company achieved approximately 17% revenue growth in constant currency, outpacing Street expectations of about 14%. Azure cloud services saw a 39% growth in constant currency, slightly above consensus estimates but remaining flat quarter-over-quarter. Despite this performance, some analysts like Piper Sandler noted concerns, as Azure’s growth fell short of investor expectations, leading to a cautious outlook for the next quarter.
DA Davidson reiterated its Buy rating with a $650 price target, emphasizing Microsoft’s continued strength across its business segments. TD Cowen also raised its price target to $655 while maintaining a Buy rating, highlighting the company’s robust earnings results. Meanwhile, KeyBanc and Oppenheimer maintained their Overweight and Outperform ratings, respectively, despite acknowledging ongoing capacity constraints in Azure. These constraints, which were expected to be a fiscal 2025 issue, have persisted into fiscal 2026, potentially impacting future growth. Overall, Microsoft’s recent developments have drawn varied responses from analysts, reflecting both optimism and caution regarding its future performance.
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