Microsoft (MSFT) Price Target Lowered at Stifel on Margin Pressure Concerns

Microsoft Corporation (NASDAQ:MSFT) is one of the AI Stocks in Focus on Wall Street. On January 26, Stifel analyst Brad Reback lowered the price target on the stock to $520.00 (from $640.00) while maintaining a Buy rating. The rating affirmation comes ahead of MSFT’s earnings report, with the firm citing near-term expense pressures limiting margin upside.

Stifel anticipates Microsoft to exceed expectations for Azure cloud services growth by an estimated 200 basis points, reaching 39% growth on a constant currency basis. This is supported by factors such as a solid macro backdrop, continued rapid OpenAI usage growth, and management’s commentary that demand still exceeds Azure supply.

Looking ahead, even though 3Q26 represents a tougher year-over-year comparison for Azure, recent data center capacity expansions should allow Microsoft to post a similar level of incremental sequential adds as 3Q25. This will likely lead to an estimated 38% year-over-year constant currency growth guide, including a degree of conservatism.

The firm anticipates operating margin pressure throughout FY26 as gross margins compress and operating expenses rise for “high-priced AI professionals (salary/compute)”

Net/net, we believe for the stock to effectively re-rate in coming quarters, the company must get to a point where Azure growth meaningfully outpaces Capex growth rates (hopefully FY27).

Microsoft Corporation (NASDAQ:MSFT) provides AI-powered cloud, productivity, and business solutions, focusing on efficiency, security, and AI advancements.

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