JOLTS Job Openings (Jun) 7.44M vs 7.5M Expected
Investing.com -- Stifel raised its price target on Microsoft (NASDAQ:MSFT) shares to $550 from $500, citing improving enterprise IT spending, accelerating Azure growth, and strong generative AI demand ahead of the company’s upcoming results.
“We believe healthy results from GCP and NOW last week and our strong checks point to a Q/Q acceleration in the enterprise spending environment,” Stifel analysts wrote. They added that this, combined with “non-AI GTM execution improvements and robust genAI demand, should enable Azure to post ~100-200bps of upside vs. 34-35% Y/Y-CC guidance.”
Looking ahead, Stifel expects commentary on fiscal 2026 capital expenditures could surprise to the upside, with Microsoft potentially guiding to “~50% YoY increase,” exceeding current street estimates of $100 billion.
“We also expect FY26 capex commentary could likely exceed our/street estimates of ~$110B/$100B, respectively, echoing Alphabet’s (NASDAQ:GOOGL) commentary during earnings,” the firm said.
Despite a potential squeeze on gross margins, Stifel remains optimistic on profitability.
“Management’s ability to manage OPEX remains robust,” analysts noted, pointing to “recent layoffs and MSFT’s focus on efficiency.”
They added, “We expect this trend to continue and offset gross-margin compression.”
As a result, the firm believes that Microsoft can continue to deliver strong profit growth.
“That we believe should enable Microsoft to post continued double-digit operating income growth in FY26/beyond,” Stifel concluded.
The bullish view comes as Azure’s growth is expected to remain in the “mid-30% range in coming quarters,” supported by both structural AI tailwinds and improved go-to-market execution.