Bank of America resets Microsoft stock forecast after earnings

Microsoft (MSFT) is simply a bundle giant, known for its Windows operating strategy and Office bundle suite. It is besides a hyperscaler. The biggest operator for the banal is artificial intelligence.

The company's gross comes from 3 antithetic concern segments. These see Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Microsoft’s unreality computing level is called Azure, and the main AI merchandise is Microsoft 365 Copilot.

The banal is down astir 16% twelvemonth to date, astatine the clip of writing, Thursday afternoon, April 30, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 scale (SPY) is up somewhat supra 5% successful the aforesaid period.

The banal is tumbling pursuing the company's Q3 net study connected April 29, trading 4.6% little adjacent $405, with the astir apt culprit being precocious superior expenditures (capex), which negatively interaction escaped currency flow.

Other cardinal quality for the stock:

• Microsoft revised its concern with OpenAI; it nary longer has an exclusive licence for its models. This isn’t astonishing aft the company’s lack from the latest OpenAI founding round.

• Microsoft made large enactment changes to amended its AI strategy, with the astir important being the naming of Jacob Andreou arsenic EVP for Copilot.

• The institution launched Copilot Cowork successful March for Frontier (early entree program).

Key facts from Microsoft’s net report

Microsoft’s Q3 gross accrued 18% (up 15% successful changeless currency) to $82.9 billion.

Chairman and CEO Satya Nadella touted the company’s AI maturation during the net call.

“In cognition work, it was different grounds 4th for Microsoft 365 Copilot spot adds, which accrued 250% year-over-year, representing our fastest maturation since launch. Quarter implicit quarter, we proceed to spot acceleration and present person implicit 20 cardinal Microsoft 365 Copilot paid seats.”

More Tech Stocks:

• BofA resets Google banal terms people aft net smasher

• Bank of America reassesses Nvidia stock, sets caller forecast

• Bank of America resets Intel banal terms people aft earnings

The company’s remaining show obligations are increasing and, according to its 10-Q Form, totaled $633 cardinal arsenic of March 31, 2026, with the commercialized information astatine $627 billion.

The signifier included 1 caveat, however. “We expect to admit astir 30% of our full institution remaining show work gross and 25% of our commercialized remaining show work gross implicit the adjacent 12 months and the remainder thereafter.”

Microsoft CFO Amy Hood provided guidance for Q4:

• Revenue should beryllium betwixt $86.7 cardinal and $87.8 billion.

• Expected capex volition summation to much than $40 billion.
  Source: Microsoft Q3 net call

She added that the sequential summation successful capex includes astir $5 cardinal from higher constituent pricing and the interaction of concern leases. Hood said that for calendar twelvemonth 2026, she expects astir $190 cardinal successful capex, including astir $25 cardinal from higher constituent pricing.

Bank of America raises Microsoft EPS estimates

Following the report’s merchandise successful a probe enactment shared with me, Bank of America expert Tal Liani and his squad updated their sentiment connected Microsoft stock.

The squad noted that Azure gross maturation of 39% successful changeless currency bushed the Wall Street statement estimation astatine 38.2%. Analysts said gross maturation of 15% and EPS of $4.27 were besides supra Wall Street statement estimates of 13.3% and $4.04, respectively.

Related: BofA resets Google banal terms people aft net smasher

Liani said CoPilot added 5 cardinal paid users, expanding the full to 20 cardinal and representing maturation of 33% 4th implicit 4th oregon 250% YoY. He besides noted that the 2026 capex guidance of $190 cardinal is $37 cardinal supra Wall Street expectations.

A akin inclination tin beryllium seen with different hyperscalers, who collectively accrued capex by $50 billion, Liani added. He said helium estimates 2026 hyperscaler capex astatine implicit $800 billion, and a way toward much than $1 trillion by 2027.

The squad said astir $25 cardinal of Microsoft’s capex summation represents higher constituent pricing alternatively than axenic measurement expansion.

Analysts raised their Microsoft EPS estimates 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 bargain standing for Microsoft banal and a terms people of $500, based connected a 24 aggregate of his estimation for the price-to-earnings ratio for 2027. This is higher than the adjacent group, which is successful the scope of 18 to 22. He believes that sustained gross maturation and borderline illustration warrant this precocious multiple.

Analysts noted downside risks for Microsoft:

• Near-term gross borderline pressure

• AI applications and exemplary providers that whitethorn innovate astatine a faster complaint than Microsoft

• The highly cyclical quality of endeavor exertion spending

Related: Bank of America reassesses Nvidia stock, sets caller forecast

This communicative was primitively published by TheStreet connected Apr 30, 2026, wherever it archetypal appeared successful the Investing section. Add TheStreet arsenic a Preferred Source by clicking here.