While disclaimers are usually meant to be a footnote, I'll start this article with one. Analyst ratings are by no means a perfect indicator, and more often than not, changes to target prices are a lagging indicator. However, they help reveal the Street sentiment.
That out of the way, Microsoft (MSFT) was pretty much in the analyst community’s bad books in the first half of the year and mostly faced downgrades and target price cuts. However, sentiment changed following Microsoft’s fiscal Q4 2026 earnings in July, which I noted had plenty to cheer about.
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Microsoft Stock Forecast: Analysts Are Getting Incrementally Bullish
The analyst community continues to shower love on Microsoft. Earlier this week, Stifel Nicholas upgraded Microsoft stock from a “Hold” to “Buy” while raising the target price from $530 to $575. It’s hardly the only brokerage that is getting bullish on MSFT, and Oppenheimer raised its target price from $515 to $570, while Cantor Fitzgerald raised its estimate from $522 to $608. This week only, Rothschild & Co Redburn, which has a “Neutral” rating on the stock, raised its target price from $400 to $440. Earlier in the month, Bank of America analyst Tal Liani raised MSFT’s target price from $500 to $600.
Looking at the consolidated ratings, of the 51 analysts polled by Barchart, 47 rate MSFT stock as a “Buy” or equivalent, while the remaining four rate it as a “Hold.” The stock’s mean target price of $564.37 is 14% higher than current levels.
www.barchart.comWhat’s Driving the Turnaround in Analyst Sentiment?
Microsoft’s June quarter earnings report helped turn around the sentiment. It wasn’t just the beat, which is more the norm than the exception for tech giants; the company’s earnings had plenty of other positives, Azure’s performance, for instance. Azure revenues rose 43% year-over-year (YoY) in fiscal Q4, versus the 40% growth in the previous quarter and ahead of Street estimates. Microsoft expects revenue growth to accelerate to 45% in the current quarter.
Microsoft’s cloud remaining performance obligations (RPOs) rose 8% versus fiscal Q3. Importantly, the RPO is getting diversified beyond the big names, and the quarter-over-quarter rise is almost entirely led by companies outside the frontier model universe.
The commentary on capex was also quite reassuring. The Satya Nadella-led company maintained the capex guidance for the current calendar year. While that won’t have made news on another day, it was noteworthy considering how fellow hyperscalers have been raising their capex budgets. Moreover, Microsoft is optimistic about generating positive free cash flows next year despite the projected increase in capex. Microsoft also showed traction in AI monetization with Microsoft 365 Copilot paid users rising to 30 million.
Software Stocks Have Rebounded
On a macro level, software stocks have rebounded amid easing “SaaSpocalypse” fears. Other software names like Adobe (ADBE) have also risen sharply from their 2026 lows as the selloff went a bit too far. A section of the market predicted the death of software companies, but there is a growing realization that while AI disruption is real, its scale would perhaps not be as extensive.
While Microsoft’s cloud business has been booming due to AI, concerns remain that its other business segments could be negatively impacted. For instance, Microsoft’s enterprise customers might reduce seat counts for its subscriptions, which would hurt the company’s lucrative and recurring revenue base. Additionally, AI could reduce the need for Microsoft’s applications like Word and Excel.
Should You Buy MSFT Stock Near $500?
The easy money has already been made in MSFT this year, but the stock hasn’t risen to exorbitant levels and is a decent, if not mouthwatering, “Buy” near the $500 level. MSFT trades at a forward price-to-earnings (P/E) of 25.57x, which is reasonable for the stock given the risk-reward equation. Overall, while I don’t expect bumper gains from Microsoft in the final quarter of the year, it should still build on the recent gains and close the year higher from these levels.
On the date of publication, Mohit Oberoi had a position in: MSFT . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.