BofA Securities analyst Brad Sills has raised his price target on Microsoft (MSFT) to $585 from $515, and reiterated a Buy rating. The move comes ahead of the company’s fiscal Q4 results due on July 30. The upgrade reflects confidence in Microsoft’s cloud and AI strategy, particularly the strength of its Azure platform.
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Azure Strength Justifies Higher Price Target for MSFT
Sills said that recent checks with Microsoft partners suggest Q4 deal activity was steady and in line with Q3. Also, Azure is said to have shown robust growth driven by cloud migrations, security, and data analytics. The analyst now expects Azure to grow 35.5% year-over-year in constant currency, slightly above the previous estimate.
Overall, Sills expects flat to 1% upside to his fiscal fourth-quarter revenue estimate of $73.7 billion, reflecting a solid 13.9% year-over-year growth.
Moreover, Sills sees Copilot as a key catalyst for FY26. As more firms start using Copilot, it could bring in extra revenue and boost profit margins.
Analyst Backs MSFT Stock’s Premium Valuation
Despite Microsoft’s stock climbing 30% since the fiscal third quarter and trading at a premium compared to its industry peers, the analyst believes that current investor sentiment and the stock’s multiple will hold firm.
This confidence stems from Azure’s steady growth in the mid-30% range, even in tough market conditions, plus lower spending as a share of revenue and rising profit margins.
Importantly, Sills maintains Microsoft as his “Top Pick.” Further, the new price target of $585 is based on 43x estimated 2026 free cash flow, or 2.5x when adjusted for a 17% growth rate, an increase from the previous valuation of 38x and 2.2x, respectively.
Is MSFT Stock a Good Buy?
Turning to Wall Street, MSFT stock has a Strong Buy consensus rating based on 30 Buys and three Holds assigned in the last three months. At $542.59, the average Microsoft stock price target implies a 6.48% upside potential.
