Microsoft (MSFT) is a software giant, known for its Windows operating system and its Office software suite. It is also a hyperscaler. The biggest driver of the stock is artificial intelligence.
The company’s revenue comes from three different business segments. These include productivity and business processes, intelligent cloud, and more personal computing. Microsoft’s cloud computing platform is called Azure and the main artificial intelligence product is Microsoft 365 Copilot.
The stock is down about 16% year to date, as of this writing, Thursday afternoon, April 30, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 Index (SPY) rose slightly over 5% in the same period.
The stock is falling following the company’s third-quarter earnings report on April 29, trading 4.6% lower near $405, with the most likely culprit being high capital expenditures (capex), which negatively impacts free cash flow.
Other key news for the stock:
Key facts from Microsoft’s earnings report
Microsoft’s third-quarter revenue rose 18% (up 15% in constant currency) to $82.9 billion.
Chairman and CEO Satya Nadella touted the company’s AI growth during the earnings conference call.
“In knowledge work, it was another record quarter for Microsoft 365 Copilot seat additions, increasing 250% year over year, representing our fastest growth since launch. Quarter over quarter, we continue to see acceleration and now have more than 20 million paid Microsoft 365 Copilot seats.”
More tech stocks:
The company’s remaining performance obligations are growing and, according to its 10-Q, totaled $633 billion as of March 31, 2026, with the commercial portion at $627 billion.
However, the form included a warning. “We expect to recognize approximately 30% of our total remaining company performance obligation revenue and 25% of our business remaining performance obligation revenue over the next 12 months and the remainder thereafter.”
Microsoft CFO Amy Hood provided guidance for the fourth quarter:
He added that the sequential increase in capital spending includes approximately $5 billion from higher component pricing and the impact of finance leases. Hood said that for calendar year 2026, it expects approximately $190 billion in capital expenditures, including approximately $25 billion of higher component prices.
Bank of America raises Microsoft EPS estimates
Following the release of the report in a research note shared with me, Bank of America analyst Tal Liani and his team updated their view on Microsoft stock.
The team noted that Azure’s revenue growth of 39% in constant currency exceeded the Wall Street consensus estimate of 38.2%. Analysts said revenue growth of 15% and EPS of $4.27 were also above Wall Street consensus estimates of 13.3% and $4.04, respectively.
Related: BofA resets Google stock price target after crushing earnings result
Liani said CoPilot added 5 million paid users, increasing the total to 20 million and representing growth of 33% quarter over quarter or 250% year-over-year. He also noted that 2026 capital spending guidance of $190 billion is $37 billion above Wall Street expectations.
A similar trend can be seen with other hyperscalers, which together increased capex by $50 billion, Liani added. It said it estimates hyperscaler capex in 2026 will be more than $800 billion, and on track to more than $1 trillion by 2027.
The team said that about $25 billion of Microsoft’s increased capital spending represents higher component pricing rather than pure volume expansion.
Analysts raised their estimates for Microsoft’s EPS for 2026, 2027, and 2028 to $17.38, $19.19, and $22.36, respectively; from $17.19, $19.10 and $22.30, respectively.
Liani reiterated a buy rating on Microsoft shares and a price target of $500, based on a multiple of 24 of his estimate for the price-earnings ratio for 2027. This is higher than that of the peer group, which is in the range of 18 to 22. He believes that the sustained revenue growth and margin profile justify this high multiple.
Analysts noted downside risks for Microsoft:
-
Near-term gross margin pressure
-
AI applications and model providers that can innovate at a faster pace than Microsoft
-
The highly cyclical nature of enterprise application spending
Related: Bank of America Reassesses Nvidia Stock, Sets New Forecast
This story was originally published by TheStreet on April 30, 2026, where it first appeared in the Investments section. Add TheStreet as a preferred source by clicking here.