Mic drop effect from Microsoft report: analysts raised targets and expect shares to rise

Historic results, the biggest beat on forecasts, confirmation of the rare ability to monetize AI - Wall Street took heart from Microsoft's quarterly report and mostly from the unexpectedly rapid growth of its Azure cloud division. Leading investment banks one after another raised their target prices on the company's stock on July 31, and one of those previously cautious changed its recommendation to "buy." The average target now suggests Microsoft's value will rise another 15%. On Thursday, its capitalization at the time exceeded $4 trillion. Here's how analysts rated the report.

KeyBanc analyst Jackson Ader dropped his Neutral rating on Microsoft shares and recommended buying them (Overweight rating). He set a target price of $630, which implies a 23% upside potential relative to the last close on July 30. The analyst was encouraged by the Azure cloud service's 39% growth, while the market on average was expecting 34.4%, wrote CNBC.

"The growth of Azure solves all problems. After the last two quarters, all the controversy is effectively lost. The Azure segment brought in $500 million and $700 million more than expected in those quarters. That's like finding a Monday.com-level company in the couch cushions (a publicly traded company with a multi-billion dollar capitalization. - Oninvest)," Ader noted in the note.

BofA's Brad Sills reiterated a buy recommendation on Microsoft securities and raised his target on them from $585 to $640, a move of nearly 25%.

"Microsoft delivered another strong quarter, with solid growth in two key areas - Azure and Office. That said, the results were driven primarily by sales directly rather than through partner channels, meaning this potential is still unrealized and could provide additional momentum. The fourth-quarter results confirm that Microsoft is one of the main beneficiaries of AI development in both applications and infrastructure," the BofA analyst wrote. He expects the tech giant's revenue growth to average 15-19% per year (mid/high teens) for years to come.

Goldman analyst Cash Rangan also reiterated a buy advice on Microsoft shares after the report and revised his target price from $550 to $630. He estimated that the company will capture market shares across the board.

"This quarter confirmed our hypothesis that AI is permeating across the technology stack, and with Microsoft's leadership in GPU computing, there is a chain reaction that is driving demand for higher margin products from the company's broad portfolio - a unique advantage. In a world where agent-based AI is growing strongly, Microsoft will benefit on all fronts: there will be increased demand for storage, databases, application utilization. It will also grow revenues through a revenue-sharing agreement with [ChatGPT developer] OpenAI," Rangan predicts. 

Microsoft's earnings growth will be more robust than the market suggests, according to Morgan Stanley analyst Keith Weiss. His forecast for the company's stock performance, meanwhile, is far from the most optimistic on Wall Street. After the report, he raised the target from $530 to $582, which is 13% higher than the quotes at the last close. Weiss s recommendation is "buy". 

"Microsoft has clearly demonstrated a strong position in the key long-term trends that are now shaping the software market. Now the main question for investors is how sustainable this growth will be. In our view, it will be more durable than is believed", - believes analyst Morgan Stanley.

Wells Fargo raised its target price on Microsoft shares from $600 to $650, maintaining an Overweight rating equivalent to an advice to buy them. Analyst Michael Terrin's forecast implies a 26% upside potential.

"In addition to exceeding expectations [for Azure revenue growth] by four percentage points, next quarter's forecast of 37% (versus our estimate of 34%) sets a strong starting point for fiscal 2026,"  Terrin wrote.

Alex Zukin of Wolfe Research recalled the market's "prohibitively high" expectations for Microsoft's results and the resulting potential risks. The company was expected to "keep the dream of generative AI alive" - is how the analyst described it.

"What Microsoft showed turned out to be not just an Olympian, but a historic achievement: the largest ever outperformance of growth forecasts for Azure and other business segments. The platform has "ignited," the analyst said, implying a comic book character named Torch Man. - Strong demand and supply chain improvements will support the potential for Azure acceleration in fiscal 2026. After the call [with analysts and investors], our confidence in Microsoft's ability to consistently deliver double-digit revenue and earnings growth has only strengthened. Given how few companies in the market are capable of this kind of performance, everything is in place for it to receive a higher valuation commensurate with its outstanding results."

Wolfe reiterated its recommendation to buy the company's securities and raised the target price from $650 to $675, which is one third higher than the current quotations;

Evercore ISI maintained an Outperform rating on Microsoft and raised its target price from $545 immediately to $625. Analyst Kirk Matern's forecast implies nearly 22% upside potential. He compared Azure's business results to  "Mic drop" -when a performer drops the microphone and walks off stage after making an impressive statement. Matherne noted that the quarter's results for this business exceeded even unofficial, higher forecasts. ;

"While AI's contribution to Azure's growth was in line with expectations, the report showed that a distinct 'AI halo' is forming around Microsoft's broader line of cloud services. This is reflected not only in Azure's results, but also in all commercial bookings growth, with new contracts up 30% year-over-year and Commercial RPOs up 35%. While Microsoft shares have risen strongly in recent months, we continue to believe that few companies are so well positioned to monetize the adoption of AI in an enterprise environment," the investment bank analyst assessed.

This article was AI-translated and verified by a human editor