Goldman Sachs has reduced its price target for Microsoft’s stock, lowering it from $500 to $450. Despite this adjustment, the firm maintains a “Buy” rating for the stock, highlighting that Microsoft’s outlook remains positive. The current trading price of Microsoft shares is $374.39, with a broader target range of $415 to $650 set by analysts.

Growth Expectations and AI’s Role

The revised price target comes after a period of market analysis, amid ongoing economic uncertainties. However, Microsoft continues to demonstrate strong financial health, backed by impressive profitability metrics. In terms of growth expectations, Goldman Sachs forecasts an 11% increase in Microsoft’s revenue and a 31%,32% growth in Azure, the company’s cloud service, slightly surpassing the consensus of 30%/31%. The anticipated Earnings Per Share (EPS) is $3.23, which is just above the consensus estimate of $3.21.

Despite the strong outlook, there are concerns about performance variability across Microsoft’s business units, especially with the current macroeconomic challenges. A key focus remains on Azure and the role artificial intelligence (AI) plays in driving its growth. Analyst Kash Rangan expects AI to continue advancing, with increasing capacity and more integrated applications.

Microsoft’s Long-Term Outlook and Strategic Partnerships

Looking ahead, Rangan projects that Microsoft’s capital expenditure (CapEx) will grow by 20% in fiscal year 2026, despite some reports of lease adjustments and cancellations. He also believes that Microsoft’s earnings growth will accelerate to 17% in fiscal year 2026, compared to a 10% increase in fiscal year 2025, driven by AI and improved capital efficiency.

The analyst also emphasized the significant partnership between Microsoft and OpenAI, which ensures strong visibility into the company’s AI revenue for 2026. As AI transitions from infrastructure to platform and application layers, Microsoft is expected to benefit significantly from this shift. The company’s impressive track record of 19 consecutive years of dividend increases further bolsters its market leadership.

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