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On Thursday, Piper Sandler increased its price target for Microsoft Corporation (NASDAQ:MSFT) shares to $475, up from the previous $435, while maintaining an Overweight rating. The revision follows Microsoft’s recent performance, which saw the company’s stock rise by 7% in after-hours trading due to better-than-expected results, particularly from its Azure cloud services. According to InvestingPro data, Microsoft maintains a "GREAT" overall financial health score and has demonstrated strong revenue growth of 15% over the last twelve months, reaching $261.8 billion.
The growth of Azure was a standout, as it accelerated to 35% on a constant currency basis, surpassing the guidance range of 31-32%. This growth was attributed to strong performance outside of artificial intelligence (AI) services and ongoing momentum within AI. Notably, the company’s capital expenditures and lease commitments decreased quarter over quarter for the first time in ten quarters. Microsoft’s management provided a "Goldilocks outlook," suggesting that spending on long-lived assets, which account for more than half of their expenditure, might moderate while the company continues to balance demand and supply within quarters. As a prominent player in the Software (ETR:SOWGn) industry, Microsoft operates with a moderate level of debt and maintains strong cash flows, as highlighted in InvestingPro’s comprehensive analysis (discover 10+ additional ProTips with a subscription).
Piper Sandler’s decision to raise the price target came after reevaluating the potential downstream impacts of recent policy and tariff changes, which the firm now deems were overestimated. With the new target, the firm has factored in higher estimates based on Azure’s accelerated growth.
The analyst from Piper Sandler highlighted that the revised price target implies a calendar year 2026 enterprise value to operating cash flow (EV/OCF) multiple of 23 times. This valuation is considered prudent and remains close to Microsoft’s five-year average of 22 times, especially in light of the prevailing macroeconomic uncertainties.
In other recent news, Microsoft has reported strong financial results for the third fiscal quarter of 2025, with several analysts adjusting their price targets accordingly. Jefferies analyst Brent Thill raised Microsoft’s stock price target to $550, citing the company’s robust performance and a revenue forecast for the fourth fiscal quarter that exceeded consensus estimates. BMO Capital also increased its price target to $485, highlighting a 35% year-over-year growth in Azure, Microsoft’s cloud computing service, which surpassed their projections. Wedbush Securities lifted their target to $515, emphasizing the significant role of artificial intelligence (AI) in driving growth, with AI contributing approximately half of Azure’s year-over-year growth. RBC Capital Markets increased their price target to $525, noting Microsoft’s effective execution within its Azure business and the resolution of capacity constraints. Meanwhile, KeyBanc maintained a Sector Weight rating, acknowledging a previous downgrade may have been premature given Microsoft’s recent strong quarterly performance. The analysts’ adjustments reflect confidence in Microsoft’s ongoing growth trajectory and its ability to exceed market expectations, particularly in cloud and AI services.
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