Microsoft (MSFT) is a software giant, known for its Windows operating system and Office software suite. And a hyperscaler. The stock’s biggest driver is artificial intelligence.
The company’s revenue comes from three different business segments. These include Manufacturing and Business Processes, Intelligent Cloud, and More Personal Computing. The Microsoft cloud computing platform is called Azure, and the main AI product is Microsoft 365 Copilot.
The stock is down nearly 16% year to date, at the time of writing, Thursday afternoon, April 30, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 index (SPY) rose slightly more than 5% during the same period.
The stock fell following the company’s Q3 earnings report on April 29, trading 4.6% lower near $405, likely due to higher capital expenditures (capex), which negatively impacted free cash flow.
Some important stock news:
Key facts from Microsoft’s earnings report
Microsoft’s Q3 revenue increased 18% (up 15% in constant currency) to $82.9 billion.
Chairman and CEO Satya Nadella touted the company’s AI growth during the earnings call.
“In the knowledge business, it was another record quarter for Microsoft 365 Copilot seat additions, up 250% year-over-year, reflecting our rapid growth since launch. Quarter after quarter, we continue to see acceleration and now have more than 20 million Microsoft 365 Copilot paid seats.”
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The company’s remaining operating liabilities are growing and, according to its Form 10-Q, generated $633 billion in revenue as of March 31, 2026, with sales at $627 billion.
The form included one caveat, however. “We expect to see approximately 30% of our company’s net operating liability revenue and 25% of our commercial operating liability revenue within the next 12 months and the remainder thereafter.”
Microsoft CFO Amy Hood provided guidance for Q4:
He added that the sequential increase in capex included about $5 billion from higher prices and the impact of capital leases. Hood said that in calendar year 2026, he expects about $190 billion in capex, including about $25 billion from higher prices.
Bank of America raises Microsoft EPS estimates
After the release of the report in the research book that I shared with myself, Bank of America analyst Tal Liani and his team updated their opinion on Microsoft stock.
The team noted that Azure’s revenue growth of 39% on a constant basis beat 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 after earnings beat
Liani said CoPilot added 5 million paid users, increasing its total paid users by 20 million and representing 33% quarter-over-quarter growth or 250% YoY. He also noted that the 2026 capex guidance of $190 billion is $37 billion above Wall Street expectations.
The same trend can be seen with other hyperscalers, who increased capex by 50 billion dollars, added Liani. He said he estimates hyperscaler capex for 2026 to be more than $800 billion, with a path toward more than $1 trillion by 2027.
The team said about $25 billion of Microsoft’s capex increase represents higher prices than volume increases.
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 buy rating on Microsoft stock and a price target of $500, based on 24 times the 2027 price-to-earnings ratio. This is higher than the peer group, which is between 18 and 22. He believes that the continued revenue growth and margin profile justify this high multiple.
Analysts noted Microsoft’s vulnerability:
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Near-term margin pressure
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AI applications and modeling providers may be innovating at a faster rate than Microsoft
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The highly cyclical nature of business application usage
Related: Bank of America reevaluates Nvidia stock, sets new forecast
This story was originally published by TheStreet on April 30, 2026, where it appeared first in the investing category. Add TheStreet as a favorite source by clicking here.
