Microsoft (MSFT) is down 21% year-to-date as investors are concerned about the tech giant’s massive capital spending on AI (artificial intelligence) infrastructure. However, most analysts remain optimistic about MSFT’s long-term growth potential amid AI-led tailwinds for the Azure cloud unit and integration of AI across its productivity tools. On Monday, Evercore analyst Kirk Materne reiterated a Buy rating on MSFT stock with a price target of $580. While the analyst remains confident about the company’s fundamentals, he warned that “there is no quick fix to the capacity issues facing Microsoft, and as such, Azure acceleration is likely a 2H CY26 event.”
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Evercore Weighs in on Microsoft Stock
Materne noted that Microsoft stock is down due to ongoing pressure on software stocks. He added that while MSFT’s fundamentals remain strong with total revenue growing 15% in Q2 FY26 (constant currency), driven by 38% Azure growth, the lack of acceleration in Azure and higher capex are weighing on the stock. Materne thinks that certain questions about Microsoft’s broader AI strategy (such as Copilot) are also impacting investor sentiment.
The 4-star analyst doesn’t see an immediate remedy for the company’s capacity issues and expects Azure revenue to accelerate in the second half of this year. Materne noted that, given the lack of a near-term catalyst for Azure and debate over the first-party/third-party allocation of GPUs, investors are currently cautious on MSFT stock. The analyst thinks that with MSFT stock trading at 18.5x GAAP EPS, concerns are already priced in. Consequently, he believes that any acceleration in Azure business later in the year or improved momentum in Copilot could drive MSFT shares higher.
Overall, Materne sees the possibility of Azure’s revenue growth accelerating to above 40% in the second half of 2026, higher than his estimate of about 38%. With regard to the recent launch of the E7 bundle, the analyst thinks that it is still very early and expects about 2.4% to 2.5% upside to his Fiscal 2028 M365 Commercial Cloud revenue estimates, driven by potential mix shift from E5 to E7.
Is Microsoft a Buy, Hold, or Sell?
Despite ongoing headwinds, Wall Street has a Strong Buy consensus rating on Microsoft stock based on 33 Buys and three Holds. The average MSFT stock price target of $591.56 indicates about 55% upside potential.
