Microsoft Price Target Rises After Azure Acceleration
BofA raised its Microsoft price target after fiscal quarter results showed accelerating Azure growth and AI efficiency, prompting a valuation re-rating.
KEY TAKEAWAYS
- BofA raised its 12-month price target to $600 and increased its valuation multiple to 28x.
- Azure revenue accelerated to about 43% year over year, with management guiding roughly 45% for Q1 FY27.
- Paid Microsoft 365 Copilot seats topped 30 million and RPO rose about 84% year over year.
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Bank of America raised its Microsoft Corp. (MSFT) price target on Sept. 1, 2026, following fiscal Q4 results that showed accelerating Azure growth and improving AI efficiency. The firm also increased the valuation multiple behind its outlook for the stock.
BofA Upgrade and Valuation
BofA Securities analyst Tal Liani raised Microsoft’s 12-month price target to $600 from $500 and reiterated a Buy rating. The firm increased its valuation multiple to 28 times calendar-year 2027 earnings per share (EPS) from 24 times, citing clearer visibility on returns from AI-driven cloud investments. The new target implies roughly 18% to 20% upside versus contemporaneous trading levels.
Azure and AI Momentum
Microsoft reported fiscal Q4 2026 results on July 29, posting about $90 billion in total revenue, up 17.7% year over year, and EPS of $4.74, beating consensus by $0.50. The quarter marked record revenue and the fifth consecutive earnings beat. Return on equity stood near 32%, and net margin was about 40.3%.
Azure and other cloud services revenue grew about 43% year over year, accelerating from roughly 39% to 40% in the prior quarter. Management guided Azure revenue growth of about 45% for fiscal Q1 2027 on a constant-currency basis and said customer demand continues to exceed available capacity. Azure annual revenue surpassed $100 billion for the first time in fiscal 2026, with full-year growth near 41%.
Microsoft’s Maia 200 AI accelerator reportedly operates up to 40% cheaper than traditional Nvidia hardware, improving AI efficiency and supporting Azure margins. Fiscal-year capital expenditures totaled nearly $116 billion, a 79.6% increase driven by cloud and AI infrastructure investments.
Paid Microsoft 365 Copilot seats exceeded 30 million, with net additions more than doubling quarter over quarter. Remaining performance obligations, or contracted but unrecognized revenue, rose about 84% year over year, signaling AI-driven monetization and backlog growth.
BofA views Microsoft as a leading beneficiary of AI monetization across Azure, Microsoft 365, and GitHub. The valuation lift reflects scaled enterprise AI adoption and clearer returns on AI capital expenditures.
