MSFT Stock Faces Lower Price Targets Ahead of April 29 Earnings

Microsoft Corp. NASDAQ: MSFT it saw little bidding last week as bulls hoped the conflict with Iran was coming to an end. That didn't stop several analysts from lowering their price target on the stock.

During the week of April 13-17:

It's worth noting that in each case, analysts have maintained an Outperform rating on MSFT, and the stock continues to have a Moderate Buy consensus rating with a target price of $577.58, a gain of more than 35%.

MSFT is up about 2% over the past five days. However, the stock is far from an all-time high and is down more than 13% in 2026. Headlines can only take a stock so far. To really move up the ladder, the company will need to deliver an earnings report. But this quarter seems like another case where good may not be good enough.

Microsoft Earnings Preview: Will Growth Be Enough?

Microsoft is scheduled to report earnings on April 29 after the market closes. As of this writing, the consensus number has Microsoft's adjusted earnings per share (EPS) coming in at $4.13, which is 6 cents above the consensus forecast of $4.07 per share.

That would be a 19% year-over-year increase. It would also be a 19% YOY gain for the first quarter of its 2026 fiscal year. Notably, that's higher than the projected 12.3% profit margin over the next 12 months.

Naysayers can take a step back and note that even at $4.13, adjusted EPS will still be down 1 cent from the previous quarter. And considering that Microsoft delivered an adjusted EPS of $4.13 in Q1 of FY2026, that would mean no sequential earnings growth.

Disruption of AI vs. Azure Growth: The Basic Argument

Analysts are predicting slower growth as Microsoft continues to spend on building its AI infrastructure. The company's record quarterly CapEx of $37.5 billion was up 67% YOY. While that's a big number, Microsoft can afford it. The real question is how long? The company's Azure cloud business is still growing, but growth has missed consensus estimates.

This is where the debate becomes easy, but challenging. In Q2, Azure AI was responsible for nearly one-third of Azure's total revenue growth. Microsoft hopes to double that growth from a $13 billion run to nearly $25 billion by the end of fiscal year 2026 (FY2026).

If it can, it sets the stage where revenue grows as CapEx tapers. That would make Microsoft's valuation look cheap. Even if it doesn't, the worst can already happen to the stock price.

The Rating Debate: Buy Low or Dim the Ceiling

Analysts forecast earnings growth of 12.3% over the next 12 months. That's an acceleration from the last two quarters, but it's slower than the last few quarters. But as of April 20, MSFT is trading at just over 26x. For some context, over the past 3 years, MSFT's P/E ratio has been close to 34x, and over 5 years, it's about 32x.

That doesn't mean MSFT is a screaming Buy, but it does suggest any frothy premium has been squeezed out of the stock. The company also has a current price-to-earnings-to-growth (PEG) ratio of about 1.6, which is attractive for a technology stock, especially with Microsoft's history.

This rating is what makes MSFT a buy down around $350 and is likely to maintain it as a Buy at its current level. But the lower price target suggests the upside may be less than expected.

That's the difference for traders over buy-and-hold investors. The company's stock is safe and well-backed by productive cash, even if it has to burn some of that cash on short-term AI infrastructure.

Trade Setup vs. The Case for Long Term Investment

Given that Microsoft may be oversold, the low price target makes the upside a little less attractive. However, that is only the case when you look at MSFT as a trade. As an investment, there is little reason to doubt the buy-and-hold case.

There's always the chance that a company's AI ambitions won't lead to profits that justify the premium price tag, but what's the benefit if they do? And what are the chances that Microsoft's AI ambitions will fall flat entirely?

Microsoft has a strong user base that gives investors assurance that it is not going anywhere. This is why MSFT is an attractive buy and hold, and perhaps a bullish trade before earnings.

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