Do Analysts Expect Microsoft Stock (MSFT) to Recover from Ongoing Slump?

Microsoft (MSFT) stock has plunged more than 23% so far in 2026 due to concerns about the tech giant’s elevated capital spending, the adoption of Copilot amid rising competition from Alphabet’s Google (GOOGL) and AI startups, fears of an AI-led SaaSpocalypse, and ongoing geopolitical tensions. Nonetheless, most Wall Street analysts remain bullish on the long-term growth potential of Microsoft’s cloud business and productivity suite. In fact, Wall Street’s average price target indicates solid upside potential and optimism about a recovery in MSFT stock.

Microsoft stock has declined despite the company reporting market-beating revenue and earnings for the fiscal second quarter. Shares declined post-earnings, as investors were concerned about the high capex, a slowdown in Q2 FY26 revenue growth from Azure and other cloud services to 39% from 40% in Q1, and a light margin outlook. Nevertheless, most Wall Street analysts are looking beyond the near-term challenges and are optimistic about continued growth.

Analysts Are Bullish on Microsoft Stock

Recently, Bank of America analyst Tal Liani reinstated coverage of Microsoft stock with a Buy rating and a price target of $500. The top-rated analyst attributed his bullish stance to “durable” multi-year growth across cloud and AI. Liani believes that Microsoft’s strength lies in its ability to capitalize on AI across both its infrastructure and applications businesses. Specifically, MSFT’s Azure cloud infrastructure unit provides the compute needed for enterprise AI workloads, while key software products, including 365, Dynamics, GitHub, and Windows, are embedded into users’ everyday tasks. Liani highlighted that his P/E multiple of 24x 2027 earnings reflects MSFT’s resilient growth and long-term monetization opportunities across its AI offerings.

Meanwhile, UBS analyst Karl Kierstead lowered the price target for Microsoft stock to $510 from $600, but reiterated a Buy rating following the meetings with the company’s investor relations team in Asia and Australia. The 5-star analyst said he remains bullish on MSFT stock, which is trading at a 19x 2026 non-GAAP EPS (earnings per share) estimate. That said, Kierstead agrees that the narrative around M365 and Copilot needs to improve for the stock to move notably higher.

Also, Evercore analyst Kirk Materne reiterated a Buy rating on Microsoft stock with a price target of $580. Materne noted that while fundamentals remain robust, with Q2 FY26 revenue growing 15% on a constant-currency basis, the lack of acceleration in the Azure business, higher capex growth, and concerns about MSFT’s broader AI strategy, particularly for Copilot, are weighing on the stock.

Materne thinks investors prefer to be on the sidelines for now, given that there is “no quick fix” to MSFT’s capacity issues and no major near-term catalysts for Azure as business is expected to accelerate in the second half of 2026. However, he believes that all these challenges are already reflected in the valuation, so any acceleration in Azure later in 2026 or “inflection in the Copilot narrative” could drive MSFT stock higher.  

Is MSFT Stock a Buy, Hold, or Sell?

With 33 Buys and three Holds, Wall Street has a Strong Buy consensus rating on Microsoft stock. The average MSFT stock price target of $586.30 indicates 58.4% upside potential from current levels.